The Impact Of Foreign Direct Investment On The Growth Of The Liberian Economy (1980-2015)

The Liberian economy has experienced one of the worst declines with an estimated 90%decline in its gross domestic product(GDP)between the years 1989 to 1995.This level of GDP decline is said to be one of the worst declines in history.The decline of the economy came about as a result of mismanagement and civil strife that ravished the country's economy.The aim of this study was to analyze the impact of foreign direct investment on the economic growth of Liberia covering the period 1980 to 2015.The ARDL Modeling or"bound" testing approach was employed to investigate the linkages among the multivariate time series in the Liberian economy and draw up optimal policy recommendation.In this study,the estimated ARDL using the real gross domestic product(RGDP)as a proxy for economic growth shows that there is a negative long-run relationship between FDI and economic growth.They long-run Granger Causality Test empirically portrays that the coefficients of RGDP and FDI are negatively signed and statistically significant in all Vector error correction models(VECMs)which means that,there is causality between the variables of interest in the long-run.The findings revealed that FDI is negatively related to economic growth.This means until the right economic policies and measures are taken to positively impact the growth variables as lay out by the Solow model plus other variables especially those used in this research,foreign direct investment remains of less significance to the growth of the Liberian economy and that it should not be seen as a remedy to revitalize the Liberian economy as is widely believed to be by policy makers and international partners.