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| Austerity Measures and Its Effect on Net Investment and Export Capacity of Tanzania (1986 To 2018) |
Amakor, Ifeoma Chinelo (PhD), and Ndubisi-Okolo Purity U. (PhD)
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Abstract:
This research work evaluated the effect of austerity measures on net investment, total export and gross domestic product of Tanzania from 1986 to 2018 as International Monetary Fund and other western financial institutions will always suggest reduction in government expenditure as one of the prerequisites for economic growth. The study employed Bond test (for long-run relationship) and ARDL short-run relationship to test for the relationship between the variables of interest, while the effect of government expenditure on selected macroeconomic variables of Tanzania was carried out using Granger Causality test. The result revealed that the Tanzanian government expenditure affects net investment and gross domestic product positively, but does not affect export; rather a negative relationship existed between government expenditure and export. The study concludes that Tanzania’s government austerity measure toward export sustainability did not yield any positive result, again for the economy to keep growing; government has to spend more until the growth comes to a sustainable level. The researcher suggested that Tanzanian monetary authorities should channel government spending toward the real sector of the economy and also apply export promotion strategy to encourage the country’s export capacity.
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