Revista de Economía y Negocios

What are the Impact of Foreign Aid to the Economic Growth? Time Series Analysis with New Evidence from Tanzania

Abstract

Albiman MM

Despite the fact that, Tanzania is receiving large inflows of foreign aid since 1970s to support its economic activities. Yet, very few literatures investigated the impact of foreign aid to economic growth of Tanzania. After revealing that, despite the large inflows of foreign aid in Tanzania, the economic growth rate is apparently low, poverty level and budget deficits is still persisting over the economy. Thus our study intends to further investigate the impact of foreign aid to economic growth by using Dynamic Ordinary Least Square (DOLS). After using endogenous growth model and time series data from 1976-2014, we found that, foreign aid has negative impact to the economic growth. Furthermore, in short run we also found that, foreign aid does not Granger Cause economic growth. The results suggest that, the government has to reconsider the type of foreign aid that is received.