ABSTRACT
This chapter investigated the influence of interest and exchange rates and other macroeconomic variables on the growth of private investments in Tanzania. It analyzed the factors influencing the growth of private investment and estimated the short- and long-run effects of interest and exchange rates. The study adopted a quantitative research design using time-series monthly secondary data from 2002 to 2020. A multiple linear regression model was employed following the assumptions of ordinary least squares (OLS) and the autoregressive-distributed lag bound (ARDL) testing approach to analyze the factors that influence the growth of private investment and estimate the short- and long-run influence of interest and exchange rates, respectively. The multiple regression analysis (OLS) results indicate that gross domestic product (GDP) growth and the inflation rate positively influence the growth of private investment. The findings from the ARDL model reveal that interest rates negatively influence the growth of private investment in the short run, with no effect in the long run. Furthermore, no evidence was found to suggest that exchange rates impact the growth of private investment in the short or long run. This study offers insights to policymakers and practitioners regarding the factors that can boost private investments in Tanzania. Moreover, the findings suggest that policymakers should control inflation and lower interest rates by revising fiscal and monetary policies.
