Assessing the Relationship Between Economic Growth and Foreign Direct Investment: Evidence from Sierra Leone

Abstract

Sierra Leone is one of the countries in Africa that relies heavily on Foreign Direct Investment (FDI) inflow for growth. This study examines the impact of Foreign Direct Investment (FDI) on economic growth, in which the Gross Domestic Product as main indicator of the country’s using time series ranging between 1990 and 2023 using time series data from the World Development Indicators (WDI). The analysis uses descriptive statistics, Correlation, Augmented Dickey fuller test for Stationarity, as well as Regression model in order to test effect of Foreign Direct Investment (FDI) towards the country economic growth. The findings shows that Foreign Direct Investment, FDI has a significant positive effect on the economic growth of Sierra Leone. In other words, a unit increase in the FDI will definitely leads to increase in the economic grow of the country. Likewise other variables, labor, exports, imports have significant contributions towards the economic growth. It also signifies that government needs to encourage investors to the country which will play greater role to the country’s economy. The findings recommend, among other things, that policies aimed at increasing the productivity and growth be implemented in order to attract investors.