Title:
THE EFFECT OF FOREIGN DIRECT REMITTANCES AND INFLATION ON ECONOMIC GROWTH IN LIBERIA: A VECTOR ERROR CORRECTION MODEL

Authors:
Lester Zomatic Tenny, Liberia

Abstract:

The objective of this paper is to investigate the effect of foreign direct remittances and inflation on economic growth in Liberia from 2002 to 2020. This study analyzed the effect of foreign remittances and inflation on economic growth, captured as Gross Domestic Product (GDP). The data collected was annual time series data from the central bank of Liberia and the international monetary fund website. Augmented DF test as well as Unit roots to test for stationarity was used. The Johansen cointegration test to test for long run relationship in the economy. The presence of non-stationarity amongst the variables at levels and I(1) as well as cointegrating equations suggest and informed the used of vector error correction model.  Heteroskedasticity as well as LM serial correlation tests for diagnostics were applied. The result from the model strongly link foreign direct remittances as well as inflation have contributed to the growth of the Liberian economy from 2002 to 2020.