Impact Of Oil Price Instability on Economic Growth in Tanzania:

Abstract

The study examined the impact of oil price instability on economic growth in Tanzania, a case study of Zanzibar islands. The study utilized data from 2011 to 2020 and the methodology used adopted a time series approach where the VECM and GARCH models were used for achieving two specific objectives of the study. Johansen test of cointegration revealed that there is a long run relationship between oil price and economic growth in Zanzibar. The results of the study show that there is a negative relationship between oil price and economic growth but all other variables used in the study show to have positive and significance with economic growth of Zanzibar. Also, the study shown that previous quarter one of 2013 conditional variance has a significant impact on the current next quarter two in 2013 conditional variance and current's conditional has a significant impact on the next period of the oil price in Zanzibar. This confirms that there is volatility clustering of oil prices in Zanzibar.