The Influence of Foreign Direct Investment (FDI) Inflows on Manufactured Exports in Tanzania: An Autoregressive Distributed Lag (ARDL) Assessment

Abstract

The industrialisation and export promotion agenda has recently gained prominence in many African countries as channels towards the path of structural transformation. Following increasing Foreign Direct Investment (FDI) inflows in Tanzania, this article uses an Autoregressive Distributed Lag (ARDL) technique to explore the association between FDI inflows and real manufactured exports for a period of 1980-2018. The findings show a significant association between FDI inflows and manufactured exports in both periods in Tanzania. Similarly, the estimated error correction coefficient is negative and significant at a one percent level. This suggests that all the variables are co-integrated in the long run. However, variables such as trade openness and real effective exchange rate recorded insignificant association with real manufactured exports in the short run. The findings highlight the need to attract more export-oriented FDIs to spur competitiveness and increase exports of manufactured products. This will be possible by increasing trade openness, revisiting investment policies and instituting macroeconomic stability policies