Export And Economic Growth in Tanzania: Co-Integration and Causality Analysis
DOI:
https://doi.org/10.26437/ajar.v11i1.883Keywords:
Causality. co-integration. economic growth. exports. Tanzania.Abstract
Purpose: This study examines the co-integration and causal relationship between exports and economic growth in Tanzania using time series data from 1998 to 2018.
Design/Methodology/Approach: Gross Domestic Product (GDP) was employed to measure economic growth, while exports of all products (from agricultural, industrial, and mineral products) were extracted from country trade statistics and employed as the independent variables. Data analysis was done after some tests, such as stationary tests, co-integration, regression analysis, and Granger causality. The stationary test result suggested using unrestricted vector autoregressive (VAR) analysis, followed by the Granger causality test.
Findings: It revealed that those exports significantly influence Tanzania’s economic growth, which implies that an increase in exports provides the market for domestically produced goods and services and thus promotes more production and economic growth. The study further confirms that economic growth does not significantly influence exports from the country. However, it was further revealed that the causality between export and economic growth is not bi-directional.
Research Limitation: Historical data may not reflect current economic conditions. Hence, there were restricted degrees of freedom when adopting complex modelling.
Practical Implication: Promoting more exports will encourage domestic producers to increase production, eventually fuel economic growth.
Social Implication: The study recommends that policymakers develop strategies for increasing the diversity of exported products and local production capacity.
Originality/Value: The novelty lies in integrating Granger causality testing with cointegration analysis for Tanzania's trade context. These novelty aspects contribute to methodological advancement and practical understanding of Tanzania's economic dynamics, providing valuable insights for policy formulation and future research.
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