Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/304062 
Year of Publication: 
2023
Citation: 
[Journal:] Cogent Economics & Finance [ISSN:] 2332-2039 [Volume:] 11 [Issue:] 1 [Article No.:] 2204606 [Year:] 2023 [Pages:] 1-17
Publisher: 
Taylor & Francis, Abingdon
Abstract: 
This 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.
Subjects: 
causal relationship
economic growth
financial development
Foreign direct investment
Granger causality
trade
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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