Browsing by Author "Mnzeru, John Peter"

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    Fiscal policy and economic growth in Tanzania 1975 - 2006: an application of the autoregressive distributed lag (ARDL) model
    (University of Dar es Salaam, 2008) Mnzeru, John Peter
    This study attempted an examination of the long run relationship between fiscal policy variables and economic growth in Tanzania for the 1975-2006 period. The study employs the recently developed ARDL model or "bounds" testing approach to Counteraction proposed by Pesaran and Shin (1996); Pesaro and Pesaran (1997); Pesaran and Smith (1998); and Pesaran et al. (2001). In addition, the Granger causality test is used to ascertain causal relationship between the dependent variable and its repressors. In addition, the long run stability of coefficients is tested using the CUSUM and CUSUMSQ. The key finding of this study is that distortionary taxes and non-tax revenues affect per capita real GDP positively. Productive government spending, government investment, private investment, foreign aid and human capital development appeared to be statistically insignificant in explaining per capita real GDP growth in Tanzania. The CUSUM and CUSUMSQ test results show that the coefficients of the repressors are stable over the long run, and any disequilibrium in the current period is corrected by 44 percent in the subsequent year. As a policy implication, the government should increase direct taxes; through increasing revenue from direct taxes through broadening the tax base and not by increasing tax rates. In addition, the non-tax revenue should also be increased by streamlining the various sources including royalty fees in the mining sector, tourist hunting fees, fees from timber and other forest products and road tolls.