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Analyzing the Drivers of Foreign Direct Investment Inflows and their Impact on Economic Growth in Tanzania

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  • Hellena Mohamedy Mushi

    (Mzumbe University Mbeya Campus College Tanzania)

  • Mumtaz Ahmed

    (COMSATS University Islamabad (CUI), Pakistan)

Abstract

This paper aims to deepen understanding and knowledge regarding the analyzing the drivers of foreign direct investment inflows and their impact on economic growth in Tanzania. Many developing countries aspire to shift from agriculture-centric economies to achieve sustainable development through industrialization. Realizing this goal, however, has been challenging, prompting an examination of the sixty-year trends and effects of FDI on Tanzania’s industrialization trajectory. This study employs a comprehensive approach utilizing time series models, specifically the Vector Autoregressive (VAR) model and the Error Correction Model (ECM), to analyze the dynamic influence of FDI on economic growth. By forecasting the 33-year trajectory of economic growth and FDI inflows using data from the World Bank spanning 1990 to 2020, this methodological framework aims to provide a nuanced understanding of the FDI- economic growth relationship, contributing valuable insights to the economic development discourse. The study’s results highlight the significant role of FDI in shaping both short- and long-term FDI progress, which is critical to advancing Tanzania’s economic growth. This underscores FDI as a key driver for economic growth by facilitating economic upgrading through FDI.

Suggested Citation

  • Hellena Mohamedy Mushi & Mumtaz Ahmed, 2025. "Analyzing the Drivers of Foreign Direct Investment Inflows and their Impact on Economic Growth in Tanzania," New Challenges in Accounting and Finance, EUROKD, vol. 13, pages 1-27.
    • Handle: RePEc:bco:ncafaa::v:13:y:2025:p:1-27
    DOI: 10.32038/NCAF.2025.13.01
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    References listed on IDEAS

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    1. Benedict Huruma Peter Mwakabungu & Jignesh Kauangal, 2023. "An empirical analysis of the relationship between FDI and economic growth in Tanzania," Cogent Economics & Finance, Taylor & Francis Journals, vol. 11(1), pages 2204606-220, December.
    2. Yugang He, 2024. "E-commerce and foreign direct investment: pioneering a new era of trade strategies," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-14, December.
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