Influence of Conditional Factors on the Financial Liberalization and Economic Growth Nexus in Tanzania

What is it about?

The paper examined the factors that influence the growth of economic growth following the embracement of financial liberalization in Tanzania. Financial liberalization is a policy that has been embarked upon by developing countries since the 1960s meant to spur their repressed economies. Despite the positive effects of the reform, most developing countries, including Tanzania, have yet to achieve the desired level of economic growth, which reflects not only poverty reduction but also the well-being of their citizens. Several scholars have been involved in the topic by focusing on the direct relationship between financial liberalization and economic growth, with mixed results and conclusions. However, previous studies have paid less attention to the confounding factors that govern the relationship between financial liberalization and economic growth in developing countries. In this regard, four macroeconomic conditional factors (financial development, trade openness, government size, and inflation) were examined . The paper revealed that only government size was found to have positive and statistical significance. The study concludes that the impact of financial liberalization in Tanzania is conditional on the level of government expenditure. Thus, the paper recommends a review of policies on macroeconomic conditional factors to enhance economic growth in Tanzania.

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