Capital Flight and External Debt Relationships in Tanzania before the Enhanced HIPC Debt Initiative
Hamis Mwinyimvua* (Department of Economics, University of Dar es Salaam), Whilhelm M. Ngasamiaku** (Department of Economics, University of Dar es Salaam)
Download Article | Published On 01/02/2006

Abstract

This article investigates factors that influence capita/flight in Tanzania, with a special focus on external debt as one of such factors. In doing so the article assesses the feedhack effects and long run impacts of such variables using time series data covering the 1970-2000 period and employs a VAR methodology within the Johansen Maximum Likelihood framework. The findings show that the external debt budget deficit, interest rate differential and GDP growth are the major factors that influence capital flight from Tanzania.The use of Granger causality test also reveals the existence of bi-directional causality among some the variables. In a way policy implication, the study suggests the need for ensuring stable macroeconomic environment, particularly sound fiscal and monetary policies. sustainahle debt and high and stable economic growth if the country is to revese the flow of capital from Tanzania

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