Work

An empirical investigation of current account balance and economic growth in Sierra Leone: evidence from GARCH-model and VEC-model

Year: 2025

Type: article

Abstract: This research examines the relationship between current account balances (CABs) and economic growth in Sierra Leone from 1980 to 2024, utilizing GARCH and VECM time series models. The outcomes reveal that persistent CABs, exchange rate volatility (EXVOL), inefficient allocation of foreign direct investment (FDI) and a rising public debt (PD) burden significantly impede lasting growth. Gross capital formation (GCF) hinders growth, suggesting a weak financial sector and an ineffective monetary policy stance. Advancements in terms of trade (ToT) are the only indicators with a lasting, positive impact on growth. In the transitory period, the economy corrects deviations from long-term equilibrium at a modest 9.12% rate, with capital formation solely showing a significant positive effect. These results suggest the need for sound macroeconomic policies to enhance stability and growth.

Source: Cogent Economics & Finance

DOI: 10.1080/23322039.2025.2599566

Authors: Foday Kamara, Seth Omondi Gor, Daniel Abala Okado

Institutions: Ministry of Finance, University of Nairobi

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: gold

Estimated APC paid: $1,165