Foreign direct investment and economic growth in Tanzania

Gibogwe, Vincent and Nigo, Ayine R.S. and Kufuor, Karen (2022): Foreign direct investment and economic growth in Tanzania.

Abstract

Tanzania has continued to experience an unprecedented increase in foreign direct investment (FDI) inflows for the past three decades. Using a vector error correction model (VECM) on data on Tanzania for the 1980–2020 period, we find the bi-causality between economic growth and FDI net inflows in the short and long run. The results imply that in Tanzania, FDI is associated with an increase in income; at the same time, economic growth leads to FDI eventually and stirs movements in FDI. We advocate for developing the local productive capacity and providing incentives to foreign firms so that they may provide positive spillovers to other sectors.

• Item Type: MPRA Paper
• Language: English
• Keywords: foreign direct investment; economic growth; absorptive capacity; human capital; market liberalization
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O43 - Institutions and Growth; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O55 - Africa

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