Effect of Foreign Aid on Domestic Saving in Tanzania

Michael O.A. Ndanshau and Cornel Joseph

MPRA Paper from University Library of Munich, Germany

Abstract: This study sought to establish the relevance of the classical view that foreign aid complements domestic savings, using Tanzania’s time-series data for 1966-2023. The empirical investigation was based on the Autoregressive Distributed Lag (ARDL) bounds cointegration technique. The empirical results show that aid augmented and substituted for domestic savings in Tanzania in both the short and long run. The study's findings suggest that the government in Tanzania should be wary of seeking aid, as doing so significantly reduces domestic savings in the short run. Moreover, the government should continue implementing policies that support aid for sustainable long-term growth.

Keywords: Foreign aid; domestic savings; ARDL (search for similar items in EconPapers)
JEL-codes: F35 O55 (search for similar items in EconPapers)
Date: 2025-09-06, Revised 2026-04-19
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:128783

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