Determinants of private investment in Tanzania Innocent

This study explores the determinants of private investment in Tanzania over the 1970- 2010 period. Five hypotheses were tested using Error Correction technique from which the short-run equilibrium relationship among the variables was established and OLS were conducted to test the sign of the regression model if it coincides with the stated theories of investment. The hypotheses are: First, GDP growth is positively related to private investment. Second, Degree of openness of economy is positively related to private investment. Third, Exchange rate is negative relation with private investment. Forth, Credit to private sector is positively related to private investment and lastly, lending rate has negative relation with private investment. Using ordinary least square regression the results suggest that GDP growth, growth of degrees of economy, credit to private sector are positively related to private investment while lending rate and exchange rate have negative relation with private investment. Using Error Correction technique, the results indicate that all variables tested under hypotheses are significant in explaining growth of private investment except degrees of openness of economy lagged in one is insignificant in explaining growth of private investment. Thus in general, the results demonstrate the influence of degree of openness of economy, GDP, Exchange rate, public investment, lending rate and credit to private sector has influence on private investment in short-run and long-run