Macroeconomic Determinants of Foreign Direct Investment Inflows and Impulse Response Function

The purpose of the contemporary research was the examination of macroeconomic determinants of foreign direct investment inflows into post-conflict Sierra Leone for the period, 2002-2015, and whether the determinants have a long-run and short-run association with FDI. A complementary exploration was the likely impulse response effect on FDI and GDP of a shock to FDI. The research method was quantitative, applying time series data with 56 observations and 6 variables. Applying the Phillips-Ouliaris cointegration model, the results indicated a statistically significant long-run relationship between FDI inflows and its determinants (Rho = --17.064, Tau = -2.996, p < .05). Moreover, the error correction model (lerrorECM) utilized to examine the short-run deviation from the long-run had the predictable sign, but was statistically insignificant (?lerrorECM = -.1542, SE = .0825, t = -1.87, p = .0680), signifying the adjustment towards equilibrium happened in the same reviewed period. Additionally, the effect on FDI of a shock to FDI had a short-term positive impact of up to the sixth period, and a negative long-term impact beginning in the seventh period. Nevertheless, the research was limited to 14 post-conflict years (2002-2015), which may be inadequate to achieve a comprehensive determinant of FDI inflows.