What the study found
The study found that exchange rate depreciation was associated with a significant positive long-run effect on sectoral credit allocation across all five sectors studied: manufacturing, agriculture, tourism, construction, and transport and communication. In the short run, exchange rate movements had negative effects in some sectors, especially transport and communication.
Why the authors say this matters
The authors conclude that the findings offer sector-specific evidence on how exchange rate movements relate to investment decisions in Tanzania, an under-researched context. They suggest the results may help inform sector-specific monetary and exchange rate interventions to support investment in volatile macroeconomic environments.
What the researchers tested
The researchers examined how exchange rate movements, measured by the level and first difference of the exchange rate, influenced sectoral investment decisions in Tanzania. They used sectoral credit allocation as a proxy for investment and applied an Autoregressive Distributed Lag (ARDL) model to quarterly time-series data, while controlling for foreign direct investment, gross domestic product growth, and lending interest rates.
What worked and what didn't
Exchange rate depreciation showed a significant positive long-run association with credit allocation in all five sectors. Short-run exchange rate movements were negative in some sectors, with transport and communication highlighted as especially affected by sudden currency fluctuations.
What to keep in mind
The abstract does not describe specific limitations. The study uses sectoral credit allocation as a proxy for investment, so the results are framed in terms of credit rather than direct investment measures.
Key points
- The study examined five sectors: manufacturing, agriculture, tourism, construction, and transport and communication.
- Exchange rate depreciation had a significant positive long-run effect on sectoral credit allocation.
- Short-run exchange rate movements had negative effects in some sectors, especially transport and communication.
- The analysis used quarterly time-series data and an ARDL model.
- Sectoral credit allocation was used as a proxy for investment.
Disclosure
- Research title:
- Exchange rate depreciation raised sectoral credit allocation in Tanzania
- Authors:
- Enock Mwakalila, Seif Ramadhani Muba
- Institutions:
- Mzumbe University, Mzumbe University, University of Dar es Salaam
- Publication date:
- 2026-02-27
- OpenAlex record:
- View
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