Macroeconomic Determinants of Savings in Developing Countries: An Empirical Investigation in Tanzania (1990-2025).

Abstract

Abstract This study examines the macroeconomic determinants of gross savings in Tanzania using annual time-series observations assembled for 1990-2025 from the Bank of Tanzania, International Monetary Fund, and World Bank. The analysis combines ordinary least squares (OLS), augmented Dickey-Fuller tests, Johansen cointegration, and a vector error-correction model (VECM). All series are integrated of order one, and the Johansen trace test supports one cointegrating relationship. In the short-run VECM, none of the differenced regressors is significant at the 5% level; the error-correction coefficient is negative and marginally significant at 10% (b = -0.381, p = .068). The OLS model is jointly significant, F(6, 28) = 23.72, p < .001, with an adjusted R2 of .800. Financial deepening is the only positive determinant significant at 5% (b = 0.329, p = .016), while the interest-rate coefficient is negative and marginal at 10% (b = -0.534, p = .074). Severe multicollinearity and a significant Ramsey RESET test, however, indicate that individual coefficients should be interpreted as exploratory rather than causal. The findings support carefully designed financial-intermediation reforms, alongside improved model specification and data documentation.