Globalization and the Size of Public Expenditure: Analysis of Growth Effect of Globalization on Tanzanian Economy

Abstract

The main focus of this paper was to examine the impact of the progress of globalization on the economy of Tanzania. The Dickey-Fuller test was employed to determine stationarity nature of the time series data while Engle-Granger test of cointegration was used to determine the long-run associationship among the variables under the study. Moreover, the study employed growth curves with and without the dummy variable to analyse the change of various economic and financial variables before and after globalization. The dummy variable was used to determine the impact of the policy change (globalization) on the economy. With the use of Dickey-Fuller test we found all variables to be non stationary. However, the variables were found to be stationary when subjected to Engle-Granger test. This indicates existence of a long-run associationship among the variables. Besides with the use of the growth curves we observed that the progress of globalization has negatively affected the size and role of government in economic affairs. All other variables including GDP are also adversely affected by the progress of globalization. Hence, this is the evidence that the policies of globalization implemented in Tanzania since 1986 through the World Bank and IMF have no significant role in the growth of Tanzanian economy.

Keywords: Globalization, Public Expenditure, Economic Growth, Tanzania