BUSINESS CYCLE, MACROECONOMIC INDICATORS AND ECONOMIC GROWTH. THE SIERRA LEONE EXPERIENCE

Abstract

<p>The study investigates the impact of business cycle fluctuation on economic growth in Sierra Leone using the autoregressive distributed lag (ARDL) model bound testing framework with annual time series data for the period 1992 to 2022. The result from the unit root shows that the variables are mixed variables of I (0) and I (1) variable series, while the bound test testifies that there is an existence of cointegration in the long run. The long-run result reveals that domestic credit to the private sector, inflation, lending interest rate, and broad money supply are the main determinants of the business cycle fluctuation on the economic growth in Sierra Leone. The result shows that broad money supply portrays a positive effect on the business cycle economic growth and statistically it is not significant at the 0.05 level of significance. It implies that for every 1% increase in the broad money supply, the business environment will be improved by 0.220 in the long run. This result implies that an increase in money supply is part of an expansionary monetary policy that tends to boost the industrial sector by expanding the investment which tends to create employment and improve the business cycle and economic growth in Sierra Leone. Policymakers are therefore encouraged to further enhance the power of appropriate monetary authorities in introducing both monetary and credit policies that will serve to increase the broad money supply.</p><p><strong> </strong></p><p><strong>JEL: </strong>E61, E62, P35<strong></strong></p><p> </p><p><strong> Article visualizations:</strong></p><p><img src="/-counters-/soc/0011/a.php" alt="Hit counter" /></p>