The Best FDI Inflows Can Do on Unemployment Rates in Tanzania: A Time Series Analysis

Abstract

The paper explores the impact of Foreign Direct Investment (FDI) on unemploymentrates in Tanzania, utilizing data spanning from 1992 to 2022. It is essential torecognize that many least-developed countries (LDCs) have strategically implementedmeasures to boost FDI acquisition, acknowledging its direct influence on nationalgrowth through increased employment opportunities. The study utilizes the AugmentedDickey-Fuller (ADF) test to examine the unit root and subsequently applies theAutoregressive Distributed Lag (ARDL) model. The findings indicate that FDI andGDP growth rates exhibit appropriate signs. Importantly, the paper establishes anegative relationship between the unemployment rate and FDI inflows in Tanzania.Therefore, to alleviate unemployment, it is crucial for the Tanzanian economy toactively attract more FDI. Achieving this objective requires leveraging policyinstruments such as exchange rates, inflation management, political stability, humancapital development, and optimizing legal and regulatory frameworks. Implementingthese measures will create a conducive environment for increased FDI inflows intoTanzania.Key Words: FDI inflow, unemployment rates, time series, Tanzania