An empirical analysis of the relationship between FDI and economic growth in Tanzania
AbstractThis study examines causal relationship between foreign direct investment (FDI) inflows and economic growth in Tanzania during 1990–2020. As financial development and trade were not incorporated in extant studies, we included them as intermediate variables because of their intermediation rol...
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| Format: | Article |
| Language: | English |
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Taylor & Francis Group
2023-12-01
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| Series: | Cogent Economics & Finance |
| Subjects: | |
| Online Access: | https://www.tandfonline.com/doi/10.1080/23322039.2023.2204606 |
| _version_ | 1797658399616270336 |
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| author | Benedict Huruma Peter Mwakabungu Jignesh Kauangal |
| author_facet | Benedict Huruma Peter Mwakabungu Jignesh Kauangal |
| author_sort | Benedict Huruma Peter Mwakabungu |
| collection | DOAJ |
| description | AbstractThis study examines causal relationship between foreign direct investment (FDI) inflows and economic growth in Tanzania during 1990–2020. As financial development and trade were not incorporated in extant studies, we included them as intermediate variables because of their intermediation role in this study. FDI inflow is considered an important economic growth catalyst in developing economies. Neoclassical growth theories claim that it enhances economic growth by augmenting capital stock and technology. According to the neoclassical theories, FDI does not enhance the long-run growth rate but instead is related to the level of output. However, empirical evidence is rather mixed, with some supporting the neoclassical theoretical views on economic growth, while others opposing them. We employ the autoregressive distributed lag model and Granger causality tests to analyze the relationship. The results indicate that there exists a long-run relationship among the variables under considerations in Tanzania. Furthermore, the finding reveals positive and statistically significant unidirectional causality running from FDI inflow to economic growth in Tanzania in the long and short run. Hence, we conclude that Tanzania should emphasize FDI-led growth policies to enhance economic growth to realize the desired economic objectives. |
| first_indexed | 2024-03-11T17:59:27Z |
| format | Article |
| id | doaj.art-e1d012aab5334bd09a6d5ba59221a48c |
| institution | Directory Open Access Journal |
| issn | 2332-2039 |
| language | English |
| last_indexed | 2024-03-11T17:59:27Z |
| publishDate | 2023-12-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Cogent Economics & Finance |
| spelling | doaj.art-e1d012aab5334bd09a6d5ba59221a48c2023-10-17T10:51:05ZengTaylor & Francis GroupCogent Economics & Finance2332-20392023-12-0111110.1080/23322039.2023.2204606An empirical analysis of the relationship between FDI and economic growth in TanzaniaBenedict Huruma Peter Mwakabungu0Jignesh Kauangal1Department of Business Admninistration, College of Business Education, Dodoma, TanzaniaDepartment of Economics, Shree Narayana College of Commerce, Ahmedabad, IndiaAbstractThis study examines causal relationship between foreign direct investment (FDI) inflows and economic growth in Tanzania during 1990–2020. As financial development and trade were not incorporated in extant studies, we included them as intermediate variables because of their intermediation role in this study. FDI inflow is considered an important economic growth catalyst in developing economies. Neoclassical growth theories claim that it enhances economic growth by augmenting capital stock and technology. According to the neoclassical theories, FDI does not enhance the long-run growth rate but instead is related to the level of output. However, empirical evidence is rather mixed, with some supporting the neoclassical theoretical views on economic growth, while others opposing them. We employ the autoregressive distributed lag model and Granger causality tests to analyze the relationship. The results indicate that there exists a long-run relationship among the variables under considerations in Tanzania. Furthermore, the finding reveals positive and statistically significant unidirectional causality running from FDI inflow to economic growth in Tanzania in the long and short run. Hence, we conclude that Tanzania should emphasize FDI-led growth policies to enhance economic growth to realize the desired economic objectives.https://www.tandfonline.com/doi/10.1080/23322039.2023.2204606Foreign direct investmentcausal relationshipeconomic growthGranger causalityfinancial developmenttrade |
| spellingShingle | Benedict Huruma Peter Mwakabungu Jignesh Kauangal An empirical analysis of the relationship between FDI and economic growth in Tanzania Cogent Economics & Finance Foreign direct investment causal relationship economic growth Granger causality financial development trade |
| title | An empirical analysis of the relationship between FDI and economic growth in Tanzania |
| title_full | An empirical analysis of the relationship between FDI and economic growth in Tanzania |
| title_fullStr | An empirical analysis of the relationship between FDI and economic growth in Tanzania |
| title_full_unstemmed | An empirical analysis of the relationship between FDI and economic growth in Tanzania |
| title_short | An empirical analysis of the relationship between FDI and economic growth in Tanzania |
| title_sort | empirical analysis of the relationship between fdi and economic growth in tanzania |
| topic | Foreign direct investment causal relationship economic growth Granger causality financial development trade |
| url | https://www.tandfonline.com/doi/10.1080/23322039.2023.2204606 |
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