This study explores the relationship between inflation and the Current Account Balance (CAB) in Sierra Leone from 1980 to 2024, focusing on both short-term and long-term economic effects. The research examines how inflation and other macroeconomic factors influence the country’s external economic performance.
The findings show that, in the long run, higher inflation can positively affect the current account balance. Economic growth also contributes to improving external stability. Meanwhile, foreign direct investment (FDI) and trade openness tend to have negative long-term effects, although their delayed impacts show positive adjustments over time. The study further reveals that inflation influences economic growth, real interest rates, and FDI.
Overall, the research highlights the importance of coordinated fiscal, monetary, and trade policies to maintain economic stability and external balance in Sierra Leone.