Applied Econometrics and the Determinants of Economic Growth

The purpose of the current research was the exploration of macroeconomic determinants of economic growth in post-conflict Sierra Leone for the period, 2002-2013, and whether the association between the determinants and economic growth is long-term and short-term. The research methodology was quantitative, and the dataset was time series with 48 observations and 7 variables. Applying the AR(2) model, the findings revealed foreign direct investment, gross capital formation, inflation, real interest rate, real exchange rate, population growth rate, and trade openness were significant determinants of economic growth. In addition, applying the Phillips-Ouliaris cointegration model, the findings revealed a statistically significant long-run association between economic growth and its determinants (Rho = -16.456, Tau = -3.240, p < .05). Furthermore, the error correction model (errorECM1) applied to determine the short-run deviation from the long-run had the expected sign, but was statistically insignificant (?errorECM1 = -.1646, SE = .1331, t = -1.24, p = .2237), indicating the adjustment towards equilibrium occurred in the same period under review. However, the research was limited to 12 post-conflict years (2002-2013), which may be insufficient to realize the complete determinant of economic growth. Subsequent studies must include additional years and variables to realize a comprehensive impact on growth.