The Effect of Foreign Direct Investment on Economic Growth in Sierra Leone

Abstract

Sierra Leone is one of thepoorest economies in Africa that relies heavily on foreign direct investment (FDI) inflow for growth. This study examines the impact of FDI on economic growth in Sierra Leone between 1990 and 2020 using time series data from the World Development Indicators (WDI). The analysis uses cointegration and error, correction models. The findings from the result showed that FDI has a significant positive effect on the economic growth of Sierra Leone in both the short and long run. The findings recommend, among other things, that policies aimed at increasing the productivity and growth be implemented. Furthermore, since FDI of the economy is also significant, government should make further efforts to strengthen the implementation of it reform agenda which has the potential to attract more FDI into Sierra Leone. This is true because, the inflow of FDI has been on the increase because of the increase in exportation since the introduction of certain reform measures by the government which have further encouraged and boost foreign investment in various sectors of the economy.