Foreign aid and economic growth nexus in Tanzania

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University of Dar es Salaam
This study investigates the effect of foreign aid on economic growth using Autoregressive Distributed Lag (ARDL) framework in the period 1970-2011. The results based on bounds test approach shows foreign aid does not have a significant effect on economic growth in the short run as well as in the long run and exhibit diminishing returns, implicating lack of absorptive capacity. Capital formation, and Human capital have a positive effect on growth whereas trade openness and inflation shows a negative growth effect. Thus necessary steps must be taken by the government to improve foreign aid effectiveness on economic growth given the massive inflows of aid in Tanzania. This must be done in tandem with expanding capital formation and human capital investment.
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Economic assistance, Economic growth, Tanzania
Mwita, D. L (2013) Foreign aid and economic growth nexus in Tanzania, Master dissertation, University of Dar es Salaam. (Available at