The impact of international trade activities and foreign direct investment on the Guinea's economy

This study aims to analyze the impact of foreign direct investment (FDI) and international trade (exports and imports) on the economic growth of Guinea during the 2006-2023 period, within the framework of an outward-oriented growth strategy. In resource-rich and developing nations such as Guinea, the growth process relies significantly not only on internal production capacity but also on external capital and trade flows. Consequently, this thesis provides an econometric analysis that integrates key structural indicators of economic policy, examining both short- and long-term relationships. A quantitative research approach was adopted, employing time series analysis techniques including the Autoregressive Distributed Lag (ARDL) model, Vector Autoregressive (VAR) model, and Granger causality tests. The Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) tests were applied to determine the stationarity levels of the variables, while the ARDL Bounds Test was utilized to assess long-term cointegration relationships. Furthermore, the Error Correction Mechanism (ECM) was implemented to examine the speed of adjustment towards long-term equilibrium, and the VAR model was used to explore internal dynamic interactions among variables. The analysis revealed that FDI has a positive and statistically significant long-term effect on economic growth. Specifically, a 1% increase in FDI as a share of GDP is associated with an approximate 0.15% increase in the growth rate. Similarly, imports exhibit a statistically significant positive effect on economic growth in both the short and long term. Conversely, the unemployment rate demonstrates a strong negative association with economic growth; a 1% increase in unemployment is estimated to decrease growth by approximately 0.92%. The export variable was excluded from the ARDL model due to insufficient stationarity; however, the VAR model indicated a simultaneous but non-directional relationship between exports and growth. Granger causality tests further showed no short-term causal effects of FDI, exports, imports, or unemployment on economic growth. Model diagnostic tests generally confirmed the validity of the econometric assumptions. Nevertheless, the presence of autocorrelation and the non-normal distribution of residuals suggest that the Guinean economy is susceptible to external shocks and possesses structural vulnerabilities. These findings underscore the importance of considering not only growth rates but also the structural characteristics and social inclusiveness of economic growth.