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Effect of Foreign Aid on Domestic Saving in Tanzania

Author

Listed:
  • Ndanshau, Michael O.A.
  • Joseph, Cornel

Abstract

This study sought to establish the relevance of the classical view that foreign aid complements domestic savings, using Tanzania’s time-series data for 1966-2023. The empirical investigation was based on the Autoregressive Distributed Lag (ARDL) bounds cointegration technique. The empirical results show that aid augmented and substituted for domestic savings in Tanzania in both the short and long run. The study's findings suggest that the government in Tanzania should be wary of seeking aid, as doing so significantly reduces domestic savings in the short run. Moreover, the government should continue implementing policies that support aid for sustainable long-term growth.

Suggested Citation

  • Ndanshau, Michael O.A. & Joseph, Cornel, 2025. "Effect of Foreign Aid on Domestic Saving in Tanzania," MPRA Paper 128783, University Library of Munich, Germany, revised 19 Apr 2026.
    • Handle: RePEc:pra:mprapa:128783
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    References listed on IDEAS

    as
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    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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