The Dynamic Synergies between Agricultural Financing and Economic Growth of Tanzania


  • Fintan Paul
  • Aulelius Lema


We apply the recently developed asymmetric ARDL cointegration methodology of Shin et al. (2011) to analyse the relationship between agricultural financing and economic growth of Tanzania. In this approach, short run and long run asymmetries are introduced via positive and negative partial sum decompositions of exogenous variables, and the model is estimable by standard OLS. Our findings reveal supporting evidence of asymmetric interactions among the examined variables in the short run and long run. The findings further reveal that endogenous variables react differently to positive and negative shocks of exogenous variables. Positive shocks of agricultural financing have considerably larger positive impacts on economic growth compared to negative shocks, while any unfavourable economic conditions would clobber agricultural financing. In light of our findings, we conclude that the existing asymmetric relationship between agricultural financing and economic growth should be taken into account and the government should increase its financing of the agriculture sector.   

Author Biographies

Fintan Paul

Corresponding Author: Department of Economics and Statistics, the University of Dodoma, P. O. Box 1208 Dodoma

Aulelius Lema

Department of Accounting and Finance, the University of Dodoma, P. O. Box 1208 Dodoma


Alabi, R. A. (2014). Impact of Agricultural Foreign Aid on Agricultural Growth in Sub-Saharan Africa: A Dynamic Specification. AGRODEP Working Paper 0006 . Washington, DC: IFPRI.

ANSAF (2012). Investing in Agriculture: Are we committed to the Maputo Declaration?; An analysis of Tanzania’s Agriculture Budget 2012/2013. Dar es Salaam: Policy Forum.

Athanasenas, A., Katrakilidis, C., and Trachanas, E. (2014). Government Spending and Revenues in the Greek Economy: Evidence from Nonlinear Cointegration. Empirica , 41 (2), 365-376.

Atil, A., Lahiani, A., and Nguyen, D. K. (2014). Asymmetric and nonlinear pass-through of crude oil prices to gasoline and natural gas prices. Energy Policy, Elsevier , 65, 567-573.

Ayeomoni, O., and Aladejana, S. A. (2016). Agricultural Credit and Economic Growth Nexus. Evidence from Nigeria. International Journal of Academic Research in Accounting, Finance and Management Sciences , 6 (2), 146-158.

BoT. (2016). Bank of Tanzania Annual Report 2015/2016. Dar es Salaam: Bank of Tanzania.

BoT. (2017) Bank of Tanzania Annual Report 2016/2017. Dar es Salaam: Bank of Tanzania.

Chandio, A. A., Jiang, Y., Rehman, A., and Jingdong, L. (2016). Impact of Government Expenditure on Agricultural Sector and Economic Growth in Pakistan. AmericanEurasian J. Agric. & Environ. Sci.,16 (8), 1441-1448.

Chebbi, H. E. (2010). Agriculture and Economic Growth in Tunisia. China Agriculture Economic Review , 2 (1), 63-78.

Ebere, C., and Osundina, K. C. (2014). Government Expenditure on Agriculture and Economic Growth in Nigeria. International Journal of Science and Research , 3 (9), 188-194.

Enders, W. (2015). Applied Econometric Time Series. Hoboken: Wiley.

FAO (2017). Investment: Government Expenditure and Credit to Agriculture. Retrieved August 16, 2017, from Food and Agriculture Organization of the United Nation:

Greenwood-Nimmo, M., Shin, Y., and Treeck, T. V. (2010). The Great Moderation and the Decoupling of Monetary Policy from Long-Term Rates in the U.S. and Germany. Working Paper 15/2010 , 1-33. Dusseldorf, Germany: Macroeconomic Policy Institute (IMK).

Hartarska, V., Nadolnyak, D., and Shen, X. (2015). Agricultural Credit and Economic Growth in Rural Areas. Agricultural Finance Review , 75 (3), 302-312.

Jatuporn, C., Chien, L. H., Sukprasert, P., and Thaipakdee, S. (2011). Does a Long-Run Relationship Exist Between Agriculture and Economic Growth in Thailand? International Journal of Economics and Finance , 3 (3), 227-233.

Kapunda, S. M., and Topera, J. S. (2013). Public Expenditure Composition and Economic Growth in Tanzania: Socio-economic Policy Implications. Asian-African Journal of

Economics and Econometrics , 13 (1), 61-70

Kareem, R. O., Bakare, H. A., Ademoyewa, G. R., Ologunla, S. E., and Arije, A. R. (2015). Nexus Between Federal Government Spending on Agriculture, Agricultural Output Response and Economic Growth of Nigeria (1979-2013). American Journal of Business, Economics and Management 2015; 3(6), 359-366.

Katircioglu, S. T. (2006). Causality and Economic Growth in a Small Nation under Political Isolation: A Case of North Cyprus. International Journal of Social Economics , 33 (4), 331-343.

Keho, Y. (2017). Threshold Cointegration, Asymmetric Causality and Wagner’s Law: The African Experience Revisited. International Journal of Economics and Finance , 9 (5), 171-180.

Kweka, J. P., and Morrissey, O. (2000). Government Spending and Growth in Tanzania, 1965 1996. CREDIT Research Paper No. 00/6 . University of Nottingham.

Kyissima, K. H., Pacific, Y. K., and Ramadhan, A. A. (2017). Government Expenditure and Economic Growth in Tanzania: A Time Series Analysis. International Journal of Development and Economic Sustainability , 5 (1), 11-22.

Matahir, H., and Tuyon, J. (2013). The Dynamic Synergies between Agriculture Output and Economic Growth in Malaysia. International Journal of Economics and Finance, 5 (4), 61-70.

Matthew, A., and Mordecai, B. D. (2016). The Impact of Public Agricultural Expenditure on Agricultural Output in Nigeria (1981-2014). Asian Journal of Agricultural Extension, Economics & Sociology , 11 (2), 1-10.

Ndulu, B. (2014). Financing Agriculture and Agribusiness in Tanzania: Challenges and Opportunites. Conference of Financial Institutions (COFI) (17th) (pp. 1-5). Arusha: Bank of Tanzania.

Obansa, S. A., and Maduekwe, I. M. (2013). Agriculture Financing and Economic Growth in Nigeria. European Scientific Journal , 9 (1), 168-204.

Paul, F., and Furahisha, G. (2017). Government Expenditure and Economic Growth Nexus: Wagner’s law or Keynesian Hypothesis for Tanzania? African Journal of Economic Review , 5 (1), 32-47.

Pesaran, M. H., and Shin, Y. (1999). An autoregressive distributed lag modeling approach to cointegration Analysis. Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium . (S. Strom, Ed.) Cambridge: Cambridge

University Press.

Pesaran, M. H., Shin, Y., and Smith, R. (2001). Bounds testing approaches to the analysis of level relationship. Journal of Applied Econometrics , 16, 289-326.

RESAKSS. (2017). Monitoring progres: Track progress towards CAADP goals and targets. Retrieved November 25, 2017, from Regiona Strategic Analysis and Knowledgel Support


RESAKSS. (2017). Tracking Progress: Tanzania Overview. Retrieved August 19, 2017, from ReSAKSS:

Shamte, S. (2014). Meeting the Financing Needs of the Agricultural Sector in Tanzania: The Second Pillar of Kilimo Kwanza. Conference of Financial Institutions (14th) (pp. 18-20). Arusha: Bank of Tanzania.

Shin, Y., Yu, B., and Greenwood-Nimmo, B. (2011). Modelling Asymmetric Cointegration and Dynamic Multipliers in a nonlinear ARDL Framework. Mimeo

Shin, Y., Yu, B., and Greenwood-Nimmo, B. (2014). Modelling Asymmetric Cointegration and Dynamic Multipliers in a nonlinear ARDL Framework. (W. C. Horrace, & R. C. Sickles, Eds.) Springer Science and Business Media , 281-314.

ÅžimÅŸir, N. C. (2012). An Econometric Analysis of the Relationship between Economic Growth and Agricultural Credit for Pro-Poor Growth in Turkey. International Journal of Social Sciences and Humanity Studies , 4 (2), 355-364.

Thapa, S. (2012). Agribusiness Indicators: Tanzania. Washington DC: Bank of Tanzania.

Udoh, E. (2011). An Examination of Public Expenditure, Public Investment and Agricultural Sector Growth in Nigeria: Bounds Testing Approach. Journal of Business and Social Sciences , 2 (1), 285-292.

Wangusi, C., and Muturi, W. (2015). Impact of Agricultural Public Spending on Agricultural Productivity: Case Study of Kenya. International Journal of Sciences: Basic and Applied Research (IJSBAR) , 24 (4), 180-187.

Wuyts, M., Mushi, D., & Kida, T. (2016). Aid dependency in financing the space for social provision in Tanzania: A Macroeconomic Perspective. Background Paper No. 5. ESRF Discussion Paper 73. Dar es Salaam: The Economic and Social Research Foundation.