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

Matthew James Turay; Abdul Koroma; Alice Sia Yambasu; Abu Kabba; Issac Tamba Issa

doi:doi:10.11648/j.jwer.20251401.14

Research Article |

| Peer-Reviewed

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

Matthew James Turay^*

, Abdul Koroma, Alice Sia Yambasu, Abu Kabba, Issac Tamba Issa

Published in Journal of World Economic Research (Volume 14, Issue 1)

Received: 2 January 2025 Accepted: 16 January 2025 Published: 21 March 2025

Views: Downloads:

Download PDF

Share This Article

Twitter
Linked In
Facebook

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.

Published in	Journal of World Economic Research (Volume 14, Issue 1)
DOI	10.11648/j.jwer.20251401.14
Page(s)	34-50
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2025. Published by Science Publishing Group

Keywords

Foreign Direct Investment, Economic Growth, Stationarity, Cointegration, Sierra Leone

References

[1]	Adefeso, H. A., & Agbrola, A. O. (2012). Infrastructure development and foreign direct investment in emerging economies. International Journal of Business and Economics, 10(3), 215-228.
[2]	Adeleke, A. A., Adebayo, A., & Babalola, S. T. (2014). The effect of foreign direct investment on Nigeria's economic growth: A time-series analysis. Nigerian Economic Journal, 15(3), 190-203.
[3]	Afzalur, R. (2015). Foreign direct investment and economic growth: A critical review of literature. Journal of Economic Development, 23(1), 99-112.
[4]	Sarumi, A. (2006). The role of foreign direct investment in the economic growth of developing countries. Economic and Financial Review, 14(2), 45-59.
[5]	Afzalur, R. (2015). The impact of foreign direct investment on the economic development of Bangladesh. Journal of Economic Policy, 18(1), 112-125.
[6]	Alfaro, L., et al. (2004). Foreign Direct Investment and Economic Growth: Does the Sector Matter? Journal of Development Economics, 73(1), 31-56.
[7]	Alvarado, A., & Ponce, C. (2017). Foreign direct investment and economic growth in Latin America: A panel data analysis. Latin American Economic Review, 26(1), 78-99.
[8]	Anyanwu, J. C. (1998). The economic determinants of foreign direct investment in Nigeria. African Economic Research Consortium, Research Paper No. 74.
[9]	Asiedu, E. (2002). On the determinants of foreign direct investment to developing countries: Is Africa different? World Development, 30(1), 107-119.
[10]	Asiedu, E. (2006). Foreign direct investment in Africa: The role of natural resources, market size, government policy, institutions and political instability. The World Economy, 29(1), 63-77.
[11]	Azman-Saini, W. N. W., et al. (2010). FDI and Economic Growth in Developing Countries: A Panel Data Approach. The European Journal of Development Research, 22(1), 89-112.
[12]	Bermejo, R., & Werner, A. (2018). Foreign direct investment and economic development: A comprehensive study of global trends. International Economics Journal, 32(2), 88-105.
[13]	Buthe, T., & Milner, H. V. (2008). The politics of foreign direct investment into developing countries: Increasing FDI through international trade agreements?. Comparative Political Studies, 41(4-5), 606-635.
[14]	Chandio, A. H., et al. (2023). The Impact of FDI in Manufacturing and Technology-Intensive Industries on Economic Growth. International Journal of Economics and Business Research, 19(2), 118-134.
[15]	Dar, A. H., & Karim, S. (2016). Foreign Direct Investment and Economic Development: A Study of Developing Countries. International Journal of Economics and Finance, 8(4), 52-63.
[16]	Demirhan, E., & Masca, M. (2008). Determinants of foreign direct investment inflows: A cross-country comparison. The Business Review, Cambridge, 10(2), 188-196.
[17]	Dike, O. A. (2018). The Impact of Foreign Direct Investment on Economic Growth in Developing Economies: The Case of Nigeria. International Journal of Economic and Financial Issues, 8(2), 75-85.
[18]	Eller, M., Fadinger, H., & Grossmann, V. (2006). Foreign Direct Investment and Economic Growth: A Cross-Country Analysis. Journal of International Economics, 70(1), 9-18.
[19]	Goldberg, L. S., & Klien, M. W. (1997). Exchange rate volatility and foreign direct investment in emerging market economies. International Economic Review, 38(4), 1143-1167.
[20]	Hossain, M., & Hossain, M. (2023). Investigating the Causal Association Between Foreign Direct Investment Inflows and Economic Growth in China. Journal of Economic Development, 32(1), 54-72.
[21]	Iamsiraroj, S., & Ulubaşoğlu, M. A. (2015). FDI and economic growth: A comprehensive review of the literature. Journal of Economic Surveys, 29(4), 657-685.
[22]	Jana, B., Kumar, S., & Batra, A. (2019). The Effect of FDI on Economic Growth in Emerging Economies: A Time-Series Analysis. International Journal of Business and Economics, 11(3), 98-109.
[23]	Kobrin, S. J. (2005). The Determinants of Trade Openness. In Handbook of International Economics.
[24]	Krogstrup, S., & Matar, L. (2005). Foreign Direct Investment, Trade, and Economic Growth: Evidence from Developing Countries.
[25]	Krugman, P. R., & Obstfeld, M. (2018). International Economics: Theory and Policy (10th ed.). Pearson Education.
[26]	Lipsey, R. G. (2006). The economic role of government in a market economy. Journal of Economic Perspectives, 20(3), 113-130.
[27]	Mankiw, N. G. (2020). Principles of Economics (9th ed.). Cengage Learning.
[28]	Marcelo, M., & Mario, F. (2004). Determinants of FDI inflows in developing nations: Evidence from panel data analysis. Journal of International Business Studies, 35(3), 425-448.
[29]	Melnyk, L., Kubatko, O., & Pysarenko, M. (2014). Foreign direct investment and economic growth: The catch-up effect in emerging markets. International Journal of Economics and Business, 16(3), 210-223.
[30]	Najia, A., Masnoon, S., & Rafique, M. (2013). Foreign direct investment and economic performance: Evidence from Pakistan. Economic Studies Journal, 22(4), 134-145.
[31]	OECD, African Development Bank (AfDB), & United Nations Economic Commission for Africa (UNECA). (2013). African Economic Outlook 2013: Structural Transformation and Natural Resources. OECD Publishing. https://doi.org/10.1787/9789264201970-en
[32]	OECD. (2023). Gross Fixed Capital Formation (GFCF) Statistics. Organisation for Economic Co-operation and Development. Retrieved from https://www.oecd.org/statistics/
[33]	Oke, O. A., Ojo, M. O., & Akinwale, Y. O. (2012). Human capital and foreign direct investment in developing countries: A case study of Nigeria. International Journal of Business and Management, 7(9), 95-104.
[34]	Olusanya, O. M. (2013). FDI inflows and economic growth in Nigeria: A pre- and post-deregulation analysis. African Journal of Business and Economic Research, 9(4), 65-78.
[35]	Opusunju, O. (2016). Impact of foreign direct investment on Nigeria's economic growth. International Journal of Economic Development Studies, 8(1), 14-27.
[36]	Ranjan, D. (2014). Exchange rate volatility and FDI inflows: Evidence from developing countries. Journal of International Business and Economics, 12(1), 21-35.
[37]	Rodriguez, F., & Rodrik, D. (2000). Trade Policy and Economic Growth: A Skeptic’s Guide to the Cross-National Evidence. NBER Macroeconomics Annual, 15, 261-324.
[38]	Sarumi, A. (2006). The contribution of foreign direct investment to economic development in Africa: Evidence from selected African countries. African Economic Review, 11(2), 49-63.
[39]	Shatz, H. J., & Venables, A. J. (2000). The geography of international investment: The role of market size and the costs of trade. The Economic Journal, 110(463), F446-F472.
[40]	Dunning, J. H., & Narula, R. (2004). Multinational enterprises and the globalization of innovation. In J. H. Dunning & R. Narula (Eds.), Multinational enterprises and the global economy (pp. 399-424). Edward Elgar Publishing.
[41]	Soremekun, O. A., & Malgwi, C. A. (2012). The role of infrastructure in attracting foreign direct investment: Evidence from emerging nations. Journal of Economics and International Finance, 4(5), 112-121.
[42]	Sunde, T. (2017). Economic expansion and foreign direct investment: A study of South Africa using the ARDL bounds testing approach. Journal of Economic Development, 23(4), 204-215.
[43]	Tsen, W. H. (2005). Human capital and foreign direct investment: The case of developing countries. Journal of Economic Development, 30(2), 59-75.
[44]	United Nations Economic Commission for Africa (UNECA). (2013). Economic Report on Africa 2013: Making the Most of Africa's Commodities: Industrializing for Growth, Jobs and Economic Transformation. UNECA.
[45]	Akinkugbu, O. (2003). The determination of foreign direct investment (FDI) inflows in developing countries: An empirical analysis. Journal of Economics and Development, 15(2), 45-63.
[46]	Velonjara, A., & Gondje-Dacka, L. (2019). The effect of foreign direct investment on economic growth in West Africa: A panel data analysis. African Journal of Economic Review, 7(2), 45-68.
[47]	Vu, K. M., & Zhang, H. (2008). Foreign Direct Investment and Economic Growth: A Panel Data Analysis. World Development, 36(9), 1624-1637.
[48]	Wadhwa, A., & Sudhakara, M. (2011). The impact of internet access on foreign direct investment: Evidence from emerging countries. Journal of Global Business and Economics, 3(2), 35-48.
[49]	Behreez, A., & Mastafa, M. S. (2011). The influence of technology and internet services on FDI in developing nations: A panel study. International Review of Economics and Finance, 8(4), 423-435.
[50]	Wang, Y. (2009). Foreign Direct Investment: Concepts, Methodologies, Tools, and Applications. IGI Global.
[51]	Wei, S. J., & Liu, L. (2001). Foreign direct investment in developing countries: The impact of political instability and corruption. World Bank Policy Research Working Paper No. 2566.
[52]	Woo, J., & Heo, U. (2009). Corruption and foreign direct investment in emerging Asian countries. The Journal of Asian Economics, 20(6), 558-570.
[53]	Yang, L., Fang, C., & Zhang, W. (2000). The impact of inflation on foreign direct investment in developing countries: Evidence from the OLS model. Journal of International Economics, 56(3), 245-263.

Cite This Article

Plain Text BibTeX RIS

APA Style

Turay, M. J., Koroma, A., Yambasu, A. S., Kabba, A., Issa, I. T. (2025). Assessing the Relationship Between Economic Growth and Foreign Direct Investment: Evidence from Sierra Leone. Journal of World Economic Research, 14(1), 34-50. https://doi.org/10.11648/j.jwer.20251401.14

Copy | Download

ACS Style

Turay, M. J.; Koroma, A.; Yambasu, A. S.; Kabba, A.; Issa, I. T. Assessing the Relationship Between Economic Growth and Foreign Direct Investment: Evidence from Sierra Leone. J. World Econ. Res. 2025, 14(1), 34-50. doi: 10.11648/j.jwer.20251401.14

Copy | Download

AMA Style

Turay MJ, Koroma A, Yambasu AS, Kabba A, Issa IT. Assessing the Relationship Between Economic Growth and Foreign Direct Investment: Evidence from Sierra Leone. J World Econ Res. 2025;14(1):34-50. doi: 10.11648/j.jwer.20251401.14

Copy | Download

@article{10.11648/j.jwer.20251401.14,
  author = {Matthew James Turay and Abdul Koroma and Alice Sia Yambasu and Abu Kabba and Issac Tamba Issa},
  title = {Assessing the Relationship Between Economic Growth and Foreign Direct Investment: Evidence from Sierra Leone
},
  journal = {Journal of World Economic Research},
  volume = {14},
  number = {1},
  pages = {34-50},
  doi = {10.11648/j.jwer.20251401.14},
  url = {https://doi.org/10.11648/j.jwer.20251401.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jwer.20251401.14},
  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.
},
 year = {2025}
}

Copy | Download

TY  - JOUR
T1  - Assessing the Relationship Between Economic Growth and Foreign Direct Investment: Evidence from Sierra Leone

AU  - Matthew James Turay
AU  - Abdul Koroma
AU  - Alice Sia Yambasu
AU  - Abu Kabba
AU  - Issac Tamba Issa
Y1  - 2025/03/21
PY  - 2025
N1  - https://doi.org/10.11648/j.jwer.20251401.14
DO  - 10.11648/j.jwer.20251401.14
T2  - Journal of World Economic Research
JF  - Journal of World Economic Research
JO  - Journal of World Economic Research
SP  - 34
EP  - 50
PB  - Science Publishing Group
SN  - 2328-7748
UR  - https://doi.org/10.11648/j.jwer.20251401.14
AB  - 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.

VL  - 14
IS  - 1
ER  -

Copy | Download

Author Information

Matthew James Turay

Faculty of Basic and Health Sciences, Department of Basic Science, Ernest Bai Koroma University of Science and Technology, Makeni Campus, Makeni City, Sierra Leone

Contact Email

http://orcid.org/0000-0002-7332-4052
Abdul Koroma

Faculty of Basic and Health Sciences, Department of Basic Science, Ernest Bai Koroma University of Science and Technology, Makeni Campus, Makeni City, Sierra Leone

Contact Email
Alice Sia Yambasu

Faculty of Basic and Health Sciences, Department of Basic Science, Ernest Bai Koroma University of Science and Technology, Makeni Campus, Makeni City, Sierra Leone

Contact Email
Abu Kabba

Faculty of Basic and Health Sciences, Department of Basic Science, Ernest Bai Koroma University of Science and Technology, Makeni Campus, Makeni City, Sierra Leone

Contact Email
Issac Tamba Issa

School of Basic Sciences, Department of Mathematics and Statistics, Njala University, Njala Campus, Njala, Sierra Leone

Contact Email

Download PDF

Sections

Plain Text BibTeX RIS

APA Style

Turay, M. J., Koroma, A., Yambasu, A. S., Kabba, A., Issa, I. T. (2025). Assessing the Relationship Between Economic Growth and Foreign Direct Investment: Evidence from Sierra Leone. Journal of World Economic Research, 14(1), 34-50. https://doi.org/10.11648/j.jwer.20251401.14

Copy | Download

ACS Style

Turay, M. J.; Koroma, A.; Yambasu, A. S.; Kabba, A.; Issa, I. T. Assessing the Relationship Between Economic Growth and Foreign Direct Investment: Evidence from Sierra Leone. J. World Econ. Res. 2025, 14(1), 34-50. doi: 10.11648/j.jwer.20251401.14

Copy | Download

AMA Style

Turay MJ, Koroma A, Yambasu AS, Kabba A, Issa IT. Assessing the Relationship Between Economic Growth and Foreign Direct Investment: Evidence from Sierra Leone. J World Econ Res. 2025;14(1):34-50. doi: 10.11648/j.jwer.20251401.14

Copy | Download

@article{10.11648/j.jwer.20251401.14,
  author = {Matthew James Turay and Abdul Koroma and Alice Sia Yambasu and Abu Kabba and Issac Tamba Issa},
  title = {Assessing the Relationship Between Economic Growth and Foreign Direct Investment: Evidence from Sierra Leone
},
  journal = {Journal of World Economic Research},
  volume = {14},
  number = {1},
  pages = {34-50},
  doi = {10.11648/j.jwer.20251401.14},
  url = {https://doi.org/10.11648/j.jwer.20251401.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jwer.20251401.14},
  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.
},
 year = {2025}
}

Copy | Download

TY  - JOUR
T1  - Assessing the Relationship Between Economic Growth and Foreign Direct Investment: Evidence from Sierra Leone

AU  - Matthew James Turay
AU  - Abdul Koroma
AU  - Alice Sia Yambasu
AU  - Abu Kabba
AU  - Issac Tamba Issa
Y1  - 2025/03/21
PY  - 2025
N1  - https://doi.org/10.11648/j.jwer.20251401.14
DO  - 10.11648/j.jwer.20251401.14
T2  - Journal of World Economic Research
JF  - Journal of World Economic Research
JO  - Journal of World Economic Research
SP  - 34
EP  - 50
PB  - Science Publishing Group
SN  - 2328-7748
UR  - https://doi.org/10.11648/j.jwer.20251401.14
AB  - 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.

VL  - 14
IS  - 1
ER  -

Copy | Download