Macroeconomic Variables and Foreign Direct Investment Inflows in Tanzania:1990-2017

Irangi, Alfred Nyakusha (2020) Macroeconomic Variables and Foreign Direct Investment Inflows in Tanzania:1990-2017. Masters thesis, The Open University of Tanzania.

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Abstract

The aim of this paper was to analyze macroeconomic variables and foreign direct investment inflows in Tanzania: 1990-2017. The study conducted through the annual time series data which covered the period from1990-2017, with the help of stata software. Unit roots test by using Augmented Dickey Fuller test was employed in this study to see stationary and non-stationary of the variables that is if the variable has the unit root or not.The study used descriptive design, which is designed to investigate if variables employed in the study possessed normality property. Multiple linear regressionas used to examine the relationship between foreign direct investment inflow and its macroeconomic variables which were selected in the sample of the study.Data collected from the World Bank Development indicators. Market size, trade openness, inflation rate, interest rate and exchange rate are among of the selected sample variables in this study. The results found that exchange rate is a major determinant of foreign direct investment inflow into Tanzania and this indicates that the fluctuated exchange rate policy adopted by the country leads to the inflow of foreign direct investment in the country. Therefore, the policy makers and responsible authority should continue to adopt effective policy measures so as to attract more foreign investors. The inflation rate and interest rate was found to be significant but with the negative sign which indicates that the small inflation rate and interest rate discourages the inflow offoreign direct investment in the country. The government needs to make more effort in the expansion ofthe inflation rate and interest rate in order to attract more foreign investors. Openness to trade and Market sizeratewere found to have insignificant relationship with foreign direct investment inflow in the country. Keywords: FDI, foreign direct investment, unit roots test and Tanzania.

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