Determinants of Foreign Direct Investment Inflows in Tanzania

Authors

  • Benjamine Gaspar Miku Eastern Africa Statistical Training Centre (EASTC)
  • Eliab Luvanda University of Dar es Salaam (UDSM)
  • Wilhelm Ngasamiaku University of Dar es Salaam (UDSM)

DOI:

https://doi.org/10.56279/ter.v14i2.212

Keywords:

Foreign Direct Investment, GDP growth, Trade Openness, ARDL, Multi-national Enterprises

Abstract

This study examines the determinants of foreign direct investment (FDI) inflows in Tanzania using the Autoregressive Distributed Lag (ARDL) model with data spanning from 1970 to 2023. The ARDL approach was chosen for its robustness in handling non-stationary data with mixed order of integration and capturing both short-term and long-term dynamic relationships. The findings indicate that GDP, exchange rate and trade openness significantly influence FDI inflows. A higher GDP positively affects FDI, reflecting market attractiveness, while trade openness facilitates investment by improving market access. However, the exchange rate negatively affects FDI inflows. Policy recommendations emphasize fostering economic growth, promoting trade liberalization and stabilizing the exchange rate through effective monetary policies. Ensuring economic stability and reducing trade barriers will create a more favorable investment environment, attracting more FDI and promoting long-term economic growth.

JEL Classification : F21; F43; O41.

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Author Biographies

Eliab Luvanda, University of Dar es Salaam (UDSM)

Dr. Eliab Luvanda work as a Senior Lecturer at the University of Dar es Salaam School of Economics and in this paper, he appear as my supervisor.

Wilhelm Ngasamiaku, University of Dar es Salaam (UDSM)

Dr. Wilhelm Ngasamiaku works at the University of Dar es Salaam School of Economics as a Senior Lecturer and in this work he appear as my supervisor

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Published

2024-12-31

How to Cite

Miku, B. G., Luvanda, E., & Ngasamiaku, W. M. (2024). Determinants of Foreign Direct Investment Inflows in Tanzania . Tanzanian Economic Review, 14(2), 159–186. https://doi.org/10.56279/ter.v14i2.212

Issue

Vol. 14 No. 2 (2024): Tanzanian Economic Review

Section

Articles

License

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this article is published under the Creative Commons Attribution 4.0 International (CC BY 4.0) License, which permits unrestricted use, distribution, adaptation, and reproduction in any medium, provided the original work is properly cited.

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