INFLATION AND ECONOMIC GROWTH IN SIERRA LEONE
Loading...
Date
2011-08-03
Authors
SWARAY, SAIDU
Journal Title
Journal ISSN
Volume Title
Publisher
UNIVERSITY OF CAPE COAST
Abstract
The study examined the relationship between inflation and economic growth in Sierra
Leone using annual data for the period 1979 to 2008. Employing autoregressive distributed lag
(ARDL) approach to cointegration, the study found a cointegrating relationship among the
variables when real GDP was used as the dependent variable and no cointegrating relationship
among the variables when inflation was used as the dependent variable. The bounds test results
revealed that inflation exerted a negative and statistically significant effect on economic growth
both in the short-run and long-run suggesting that higher rates of inflation is inimical to
economic growth in Sierra Leone.
Also, investment as a share of GDP and government expenditure exerted a positive and
statistically significant impact on economic growth both in the short-run and long-run suggesting
that government expenditure and investment are critical in enhancing sustained economic growth
and development. The Granger causality test result revealed a unidirectional causality between
inflation and economic growth and ran from economic growth to inflation. Thus, the study
concluded that government expenditure in the form of investment is an important channel
through which the economy can achieve economic growth. Hence, the study recommended that
government should embark on judicious investment especially in infrastructure to achieve
sustained economic growth.
Description
Macro Economics