Foreign direct investment and economic growth in Tanzania

Vincent Gibogwe, Ayine R.S. Nigo and Karen Kufuor

MPRA Paper from University Library of Munich, Germany

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.

Keywords: foreign direct investment; economic growth; absorptive capacity; human capital; market liberalization (search for similar items in EconPapers)
JEL-codes: O11 O43 O47 O55 (search for similar items in EconPapers)
Date: 2022-10-24, Revised 2022-10-20
New Economics Papers: this item is included in nep-fdg and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:115028

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