Private Capital Inflows and Economic Growth in the Tanzania

Magoti,, Pius Francis (2017) Private Capital Inflows and Economic Growth in the Tanzania. Masters thesis, The Open University of Tanzania.

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Abstract

Despite the increased flow of investment to developing countries in particular, Sub-Sahara African (SSA) countries, Tanzania inclusive, are still characterized by low per-capital income, high unemployment rates and low and falling growth rates of GDP, problems which Private investment are theoretically supposed to solve. It is against this background, that this study analysed the direction and significance of the effect of Private Capital Inflows on Economic Growth in Tanzania. The annual time series Quantitative Secondary data for the period 1990 to 2015were used for the Study. The method of Least Squares (OLS) was employed to derive the empirical relationship between variables where some tests were carried out including Unit root, Co-integration, and Error Correction Model. The findings was that Private Capital Inflows, and Net export were statistically positive in explaining variations in Tanzania’s economic growth. The coefficient of domestic investment was negative and statistically significant. These results prove that gross fixed capital formation affect the economic growth regardless of the negative sign. The negative sign may be due to low levels of Private Investment in Tanzania. This reveal that only small part of domestic savings is used for domestic investment. Based on the above, Private Capital Inflows is found to affect economic growth positively in the long run. The study helps investment authorities, to review laws and regulations basing on the study so as to be in a position to identify which part of sectors should be given incentives to attract more Private investments. On top of that the study will opens up a way for others to conduct further studies on the issues related to the determinants of Private Capital Inflows in Tanzania.

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