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- Title
Trade and Foreign Direct Investment in Tanzania: Do they Matter for Economic Growth?
- Authors
Magai, Petro Sauti
- Abstract
This paper analyses the effect of trade and foreign direct investments (FDI) on Tanzania's economic growth using time-series data from 1970 to 2019. All the variables are found to be integrated of order one, I (1). The study applies the cointegration test and a VECM accordingly. The Johansen test underscores the presence of two co-integrating equations, which confirms the long-run associations between variables. The VECM demonstrates the presence of a long-run relationship running from FDI, TRD, and EXR to GDP growth. While the Wald test reveals the presence of short-run causality running from FDI and TRD to GPD; however, there is no short-run causality from EXR to GDP. The study concludes that there is a positive relationship between the explanatory variables and economic growth. Therefore, the Tanzanian government should encourage exports to realize the potential effects of trade and FDI on economic growth.
- Subjects
TANZANIA; FOREIGN investments; ECONOMIC development; GROSS domestic product; TIME series analysis
- Publication
Tanzania Economic Review, 2021, Vol 11, Issue 2, p22
- ISSN
0856-3373
- Publication type
Article