Export performance & investment behaviour of firms in Ghana
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Date
2008-01
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The Economy of Ghana: Analytical Perspectives on Stability, Growth and Poverty
Abstract
Introduction After two decades of macroeconomic stabilization policies, Ghana still has a low GDP per capita and is highly dependent on commodity exports. Specifically, it is one of the countries with the lowest proportion of exporting manufacturing firms in sub-Saharan Africa. To change this situation, a shift towards non-traditional exports with higher demand growth and less price volatility is a precondition. However, the declining terms of trade and external shocks have an impact on macroeconomic variables such as exchange and interest rates and therefore reduce the prospects for investment and growth (UNCTAD, 2004). Therefore at the macro level export and investment performance are closely linked. From previous studies and theoretical considerations, a strong relationship between export performance and investment behaviour at the firm level is also expected (Collier and Pattillo, 2000; Rankin et al., 2002, Söderbom and Teal, 2003). Because of the fixed costs of marketing and access to foreign markets, a certain scale of operations is needed for a firm to be a successful exporter. Furthermore, firms need to invest in equipment and technology, to produce goods of the required quality for exporting, and to exploit economies of scale to produce goods more cheaply. On the other hand, profits from good export performance might be used for subsequent investment, as many firms depend on internally generated funds. © James Currey Ltd 2007.