Economic Growth And Its Relationship With Export, Foreign Direct Investment And Government Expenditure In Tanzania

ABSTRACT

The key aim of this thesis was to analyse the relationship among exports, foreign direct investments, government spending and economic development in Tanzania. The specific objectives of the study aimed to examine the effect of exports on economic growth in Tanzania; to inspect the relationship among foreign direct investments on economic growth, and to test the relationship between government spending (Gross national expenditure) and economic growth. Additionally, the research questions were as follows: Does there exist a link between exports and economic growth?; does there exist a relationship between foreign direct investment and economic growth?; and does there exist an association between government spending (Gross national expenditure) and economic growth?. This study used annual time series data covering the period from 1988 – 2018 and employed Granger causality approach.

The study concluded that, the direction of causality is from foreign direct investment (FDI) to economic growth (GDP); the way of causality is from both economic growth (GDP) and government expenditure (GOVTEXP) to export (EXPO); the direction of causality is also from both foreign direct investment (FDI), exports (EXPO) to government expenditure (GDP); and is from both government expenditure (GDP) and export (EXPO) to foreign direct investment (FDI). Centred on these findings, the research suggested that exports can encourage economic growth of Tanzania. The government should direct its resources towards the promotion of exports in enlightening economic growth.