An Investigation of The Relationship Between Fiscal Policy and Economic Growth in Tanzania Evidence from Time-Series Analysis

Abstract

This study investigated into the dynamic relationship between fiscal policy and economic growth in Tanzania, focusing on a time-series analysis spanning the years 1990 to 2020. Emphasizing government revenue, government expenditure, and GDP as key variables, the research employed statistical techniques, notably regression analysis, to discern the impact of fiscal policy on the nation's economic path. The geographical scope is concentrated on Tanzania, considering the broader macroeconomic and political context. A comprehensive understanding is sought by incorporating factors such as the country's economic structure, political stability, and institutional framework. Secondary data from reputable sources like the National Bureau of Statistics, Bank of Tanzania, and World Bank form the basis of the study, ensuring a strong empirical foundation. Various indicators, including tax revenue and government spending, were meticulously analyzed to unravel the intricate relationship between fiscal policy and economic growth in Tanzania. The examination extends beyond mere correlation, employing statistical rigor to determine the relationship between fiscal policy and the nation's economic landscape. In addition to assessing the broader impact of fiscal policy, this study scrutinizes the effectiveness of specific fiscal instruments. Tax policy, public expenditure management, and debt management are examined individually to gauge their efficacy in steering economic growth. The study revealed that government expenditure holds a statistically significant positive relationship with economic growth, on the other hand, taxation policies were found to have a significant positive impact on economic growth, and finally, concerning public debt, the study uncovered a significant negative association with economic growth, highlighting the importance of maintaining prudent debt levels to avoid adverse effects on the economy. The government and policy makers should implement strong and proper monitoring and evaluation mechanisms for fiscal policies.