Remittance Inflows, Poverty and Economic Growth in Tanzania: A Multivariate Causality Model

Abstract

Purpose: This study examined the causal flow between economic growth, poverty, and remittances for Tanzania, using annual data from 1990 to 2020. Tanzania is working to achieve the policy targets set in its Vision 2025, and the findings of this study will add value to policy effectiveness and timing. The study uses household consumption expenditure per capita (HCE) as a measure of poverty, the rate of change in GDP as a measure of economic growth, and remittance inflows as a percentage of GDP as a measure of remittances. Methodology: The study used autoregressive distributed lag (ARDL) approach to cointegration and ECM-based Granger causality. Results: The study found a bidirectional causality between remittances and poverty in the short run and a unidirectional causal flow from remittances to poverty in the long run. No causality was found between remittances and economic growth, and between economic growth and household consumption expenditure per capita. Conclusions: The findings of this study point to the importance of remittances in poverty reduction and sustainable development in Tanzania. Recommendations: Tanzania is encouraged to continue implementing policies that support remittance inflows to positively influence poverty reduction.