The objective of this study is to analyze the relationship between Foreign Direct Investment (FDI) and economic growth in Sierra Leone. Data from 1980 to 2014 sourced from the World Bank was used to do the empirical analysis. The estimation techniques were Augmented Dickey Fuller unit root test, Johansen Cointegration, Vector Error Correction Model, Granger Causality Test and Ordinary Least Square (OLS). The results indicated that, the series employed in the study became stationary at first difference; there is a long-run relationship between the variables used in the study. The error correction model, which indicated the speed of equilibrium adjustment, is slow but confirms the existence of long –run equilibrium relationship between the variables used in the study. The Granger causality test results indicated a unidirectional relation between FDI and GDP in Sierra Leone. Thus, FDI granger-cause GDP in Sierra Leone. This is confirmed by the OLS results indicating a positive relationship between GDP and FDI. The results equally indicated that FDI is statistically significant to explain GDP in Sierra Leone. Lagged GDP can help explain present GDP growth in Sierra Leone, thus it is statistically significant. However, real effective exchange rate was not statistically significant to explain GDP growth in Sierra Leone. The estimated model is free from statistical problems such as autocorrelation, functional form misspecification etc as indicated on Table 6. Once FDI contributes to GDP growth in Sierra Leone, it is therefore recommended that, the government of Sierra Leone should ensure macroeconomic stability to sustain foreign investors in it domestic economy as well as attracting new investors.
