Macroeconomic Determinants of Foreign Direct Investment in Sierra Leone: An Empirical Analysis
- Sesay Brima
This study presents an empirical investigation into the macroeconomic determinants of Foreign Direct Investment in Sierra Leone between 1990 and 2013 in both the long and the short run. The Ordinary Least Squares (OLS) estimation is used and the time series properties of the variables were examined in the process. It first tests for unit root using the Augmented Dickey Fuller (ADF) test. The Johansen co-integration technique was employed to derive the long-run relationship. The result shows that market size, openness, exchange rate and natural resource availability exert positive relationship with FDI while inflation and money supply exert a negative one. The short run error correction model was also employed and reveals that market size, economy openness, inflation and natural resource availability are the main determinants of FDI inflow to Sierra Leone. Policy recommendation calls for the expansion of the country’s GDP, government strengthening the implementation of its reform agenda, strengthening its monetary policy to curtail inflation, and to embark on more infrastructural development all of which have the potential to attract more FDI.
- Michael ZhangEditorial Assistant