Determinants of Export Performance in Tanzania



Abstract. Tanzania has been experiencing a persistent balance of trade deficit since the 1970s. This paper examines factors affecting export performance in Tanzania during the 1966-2015 period by employing Johansen cointegration and Granger causality approach. The Error Correction Modeling is employed to estimate the model. Based on the findings of cointegration approach the paper reveals that there is a stable long-run relationship between the series. Results suggest that economic real per capita GDP, trade liberalization, and exchange rate have a positive impact on export performance in Tanzania. The results also reveal that exports and official development assistance are negatively associated in the economy of Tanzania. Furthermore, the paper establishes the direction of causality between exports and economic growth. The results on this causal relationship suggest that real per capita GDP causes exports and not otherwise. This implies that that policies geared towards real per capita GDP should be given first priority if export trend is to be enhanced over time. Notwithstanding, from a policy point of view the macroeconomic instability is supported by the findings as inflation has a negative impact on exports. Increases inflation in the exporting economy than importing economy causes exports to become more expensive, resulting in a decline in exports.

Keywords. Export, real per capita GDP, macroeconomic stability, trade liberalization.

JEL. F14, F35, F43.


Export; Real per capita GDP, Macroeconomic stability; Trade liberalization.

Full Text:


Abu Al-Foul, B. (2004). Testing the export-led growth hypothesis: evidence from Jordan. Applied Economics Letters, 11(6),393-396. doi. 10.1080/1350485042000228268

Abdul-Khaliq, T., Shatha, S., & Abu Shihab, R. (2014). The causal relationship between exports and economic growth in Jordan. International Journal of Business and Social Science, 5(3), 302-308.

Agosín, M.R., (1991). Trade policy reform and economic performance: a review of the issues and some preliminary Evidence’, UNCTAD Discussion Papers, 41, UNCTAD, Geneva.

Ahdi, N.A., Aye, G.C., Balcilar, M., & Gupta, R. (2013). Causality between exports and economic growth in South Africa: evidence from linear and nonlinear tests, University of Pretoria, Department of Economics, Working Papers, No. 201339,.

Ahmed, N.U. (2000). Export responses to trade liberalisation in Bangladesh: a cointegration analysis’, Applied Economics, 32(8), 1077-1084. doi. 10.1080/000368400322138

Awokuse, T.O. (2003). Is the xport-led growth hypothesis valid for Canada? Canadian Journal of Economics, 36(1), 126-136. doi. 10.1111/1540-5982.00006

Babatunde, A.M. (2009). Can trade liberalization stimulate export performance in Sub-Saharan Africa? Journal of International and Global Economic Studies, 2(1), 68-92.

Balogun, E.D. (2007). Effects of exchange rate policy on bilateral exports trade of WAMZ countries, MPRA Working Paper, No. 6234. [Retrieved from].

Bank of Tanzania, (2011). Annual report. Directorate of Economic research and Policy, Bank of Tanzania. [Retrieved from].

Clarke, R., & Kirkpatrick, C. (1992). Trade policy reform and economic performance in developing countries: assessing the empirical evidence’, in Industrial and Trade Policy Reform in Development Countries, R. Adhikari, C. Kirkpartick & J. Weiss (Eds). pp.56-73. Manchester University Press.

Collier, P. (2006). The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It, Oxford University Press, Oxford.

Collier, P., & Dehn, J. (2001). Aid, Shocks and Growth, World Bank Policy Research Working, 2688, World Bank, Washington, DC.

Collier, P., & Hoeffler, A. (2002). Aid, Policy and Growth in Post-Conflict Societies, World Bank Policy Research Working Paper 2902, World Bank, Washington, DC.

Desai, M.A., & Hines, J.A. (2005). Value-added taxes and international trade: the evidence. Mimeo, University of Michigan.

Diks, C., & Panchenko, V. (2005). A note on the Hiemstra-Jones test for Granger non-causality, Studies in Nonlinear Dynamics and Econometrics, 9(2). 1-9. doi. 10.2202/1558-3708.1234

Eichengreen, B. (2008). The real exchange rate and economic growth, Working Paper No. 4. Commission on Growth and Development, World Bank, Washington, DC. [Retrieved from].

Eichengreen, B., & Gupta, P. (2014). Tapering talk: the impact of expectations of reduced Federal Reserve security purchases on emerging markets. Policy Research Working Paper Series, No. 6754, World Bank, Washington, DC. [Retrieved from].

Elbadawi, I. (1999). Can Africa export manufactures? the role of endowment, exchange rates, and transaction costs. World Bank Policy Research Working Paper, No. 2120. doi. 10.1596/1813-9450-2120

Engle, R.F., & Granger, C.W.J. (1987). Co-integration and error correction: representation, estimation and testing. Econometrica, 55(2), 251-276. doi. 10.2307/1913236

Feldstein, M., & Krugman , P. (1990). International trade effects of value-added tax, in: Razin, A., Slemrod, J. (Eds.), Taxation in the Global Economy. University of Chicago Press, pp.263-282.

Fugazza, M. (2004). Export performance and its determinants: supply and demand constraints. Policy Issues in International Trade and Commodities Study Series, No. 26, UNCTAD. [Retrieved from].

Ghartey, E.E. (1993). Casual relationship between exports and economic growth: some empirical evidence in Taiwan, Japan and the US, Applied-Economics. 25(9), 1145-1152. doi. 10.1080/00036849300000175

Greenaway, D., & Sapsford, D. (1994). What does liberalization do for exports and growth, Weltwirtschaftliches Archiv, 130(1), 152-174. doi. 10.1007/BF02706014

Greenaway, D., & Sapsford D. (1997). Modelling growth (and liberalization) using smooth transitions analysis. Economic Enquiry, 35(4), 798-814. doi. 10.1111/j.1465-7295.1997.tb01965.x

Guillaumont, P., & Chauvet, L. (2001). Aid and performance: a reassessment. The Journal of Development Studies, 37(6), 66-92. doi. 10.1080/713601083

Haddad, M., & Pancaro C. (2010). Can real exchange rate undervaluation boost exports and growth in developing countries? yes, but not for long. Economic Premise, No. 20, World Bank, Washington, DC. [Retrieved from].

Helleiner, G.K. (1994). Trade policy and industrialization in turbulent times, Routledge, London and New York.

Hiemstra, C., & Jones, J.D. (1994). Testing for linear and nonlinear Granger causality in the stock price volume relation. Journal of Finance, 49(5), 1639-1664. doi. 10.2307/2329266

Jenkins, R.O. (1996). Trade liberalization and export performance in Bolivia. Development and Change, 27(4), 693-716. doi. 10.1111/j.1467-7660.1996.tb00608.x

Johansen, S., & Juselius, J. (1990). Maximum likelihood estimation and inference on cointegration-with applications to the demand for Money. Oxford Bulletin of Economics and Statistics, 52(2), 169-210. doi. 10.1111/j.1468-0084.1990.mp52002003.x

Johnson, S.H., Ostry, J., & Subramanian, A. (2007). The prospects for sustained growth in Africa: benchmarking the constraints. IMF Working Paper No. 07/52. [Retrieved from].

Joshi, V., & Little, I.M.D. (1996). India’s economic reforms 1991-2001, Oxford University Press, Oxford.

Kalaitzi, A. (2013). Exports and economic growth in the United Arab Emirates. Submitted to: RIBM Doctoral Symposium. Manchester Metropolitan University Business School.

Kang, J.S., Prati, A., & Rebucci, A. (2010). Aid, exports and growth. a time-series perspective on the dutch disease hypothesis. IDB Working Paper Series No. IDB-WP-114. Inter-American Development Bank. [Retrieved from].

Keen, M., & Syed, M. (2006). Domestic taxes and international evidence: some evidence. IMF Working Paper No. WP/06/47. [Retrieved from].

Kirpalani, V.H., & Macintosh, N.B. (1980). International Marketing Effectiveness of Technology-Oriented Small Firms, Journal of International Business Studies, 23(3), 81-90. doi. 10.1002/tie.5060230310

Kumar, N. (1998). Multinational enterprises, regional economic integration and export-platform production in the host countries: an empirical analysis for the US and Japanese corporations. eltwirtschaftliches Archiv, 134, 450-483. doi. 10.1007/BF02707926

Majeed. M.T., & Ahmad, E. (2006). Determinants of exports in developing countries. International Conference on Governance and Institutions, 22nd Annual General Meeting and Conference of the Pakistan Institute of Development Economics, Islamabad.

Marandu, E.E. (2008). Strategy factors associated with the export performance of manufacturing firms. The Journal of Business in Developing Countries, 11, 33-76.

Mohamad, S., Nair, M., & Jusoff, K. (2009). Exchange rates and export competitiveness in selected ASEAN economies. International Business Research, 2(2), 156-166.

Morrissey, O., & Mold, A. (2006). Explaining Africa’s export performance-taking a new look. Paper presented at the ninth annual conference of GTAP, Adiss Abbaba, Ethiopia, June 3-8. [Retrieved from].

Moyo, D. (2010). Dead aid: why aid makes things worse and how there is another way for Africa. London: Penguin Books.

Mukherjee, C., White, H., & Wuyts, M. (2003). Econometrics and data analysis for developing countries. London: Routledge.

Munemo, J., Bandyopaghya, S., & Basistha, A. (2007). Foreign aid and export performance: a panel data analysis of developing countries. Chapter 21, in: S. Lahiri, (Ed). Theory and Practice of Foreign Aid, 1,pp. 421-433, Elsevier, Amsterdam, Oxford.

Munemo, J. (2007). Foreign aid and export diversification in developing countries. Economics and Business Department, Moravian College 1200 Main St., Bethlehem, Pennsylvania and World Bank.

OECD, WTO, (2013). Evaluating the effectiveness of aid for trade. In Aid for Trade at a Glance: Connecting to Value Chains, OECD iLibrary, 145-171. doi. 10.1787/22234411

Octavio, A., Sukant, R., Misra, K., & Nelson, J. (2002). Estimation of efficient regression models for applied agricultural economics research. Annual Meeting of the American Agricultural Economics Association Long Beach, CA, July 28-31.

Prachowny, M.F.J. (1970). The relationship between inflation and export prices: an aggregate study. Working Papers 27, Queen’s University, Department of Economics. [Retrieved from].

Panchenko, V. (2006). A new statistic and practical guidelines for nonparametric Granger causality testing. Journal of Economic Dynamics & Control, 30(9-10), 1647-1669. doi. 10.1016/j.jedc.2005.08.008

Petersson, J. (2004). Foreign aid fungibility, growth, and poverty reduction. Working Paper, Department of Economics, Stockholm.

Phillips, P.C.B., & Perron, P. (1988). Testing for unit roots in time series regression. Biometrika, 75(2), 335-346. doi. 10.1093/biomet/75.2.335

Rajan, R.G., & Subramanium, A. (2005). Aid and growth: what does the cross-country evidence really show?. IMF Working Paper No. 127, International Monetary Fund, Washington, DC. [Retrieved from].

Ramírez, O.A., Misra, S.K., & Nelson, J. (2003). Efficient estimation of agricultural time series Models with nonnormal dependent variables. American Journal of Agricultural Economics, 85(4), 1029-1040. doi. 10.1111/1467-8276.00505

Rodrik, D. (2009). The real exchange rate and economic growth, in Brookings Papers on Economic Activity, Fall 2008, D.W. Elmendorf, N.G. Mankiw, & L.H. Summers (Ed), 365-412. Washington, DC: Brookings Institution.

Santos-Paulino, A.U. (2000). Trade liberalisation and export performance in selected developing countries. Department of Economics, Studies in Economics, No. 0012 University of Kent, Canterbury. [Retrieved from].

Shafaeddin, S.M. (1994). The imp act of trade liberalization on export and GDP in least developed countries. UNCTAD Discussion Papers, No.85, UNCTAD, Geneva.

Sharma, S.C., & Dhakal, D. (1994). Causal analysis between exports and economic growth in developing countries, Applied Economics, 26(12), 1145-1157. doi. 10.1080/00036849400000112

Shan, J., & Sun, F. (1998). On the export-led growth hypothesis: the econometric evidence from China. Applied Economics, 30(8), 1055-1065. doi. 10.1080/000368498325228

Slemrod, J. (2004). Are corporate tax rates, or countries converging? Journal of Public Economics, 8(6), 1169-1186. doi. 10.1016/S0047-2727(03)00061-6

Stock, J. H., & M. W. Watson (2003). Forecasting output and inflation: the role of asset prices. Journal of Economic Literature, 41(3), 788-829. doi. 10.1257/002205103322436197

Styles, C. (1998). Export performance measures in Australia and in the United Kingdom. Journal of International Marketing, 6(3), 12-36.

The United Republic of Tanzania, (2012). The economic survey. Ministry of Finance, Dar es salaam. Burnside, C. & D. Dollar (2000). Aid, policies and growth. American Economic Review. 90(4), 847-68. doi. 10.1257/aer.90.4.847

Thomas, V., Nash, J. & Edwardsm, S. (1991). Best practices in trade policy reform. Oxford University Press for the World Bank.

Toda, H.Y., & Yamamoto, T. (1995). Statistical inference in vector autoregressions with possibly integrated processes. Journal of Econometrics, 66(1-2), 225-250. doi. 10.1016/0304-4076(94)01616-8

UNCTAD, (2005). Trade liberalization and economic reform in developing countries: structural change or de-industrialization?. No. 179, April 2005. [Retrieved from].

UNCTAD, (1989). Trade and development report. UNCTAD, Geneva.

Utkulu, U., Seymen, D., & Ari, A. (2004). Export supply and trade reform: the Turkish evidence. International Conference on Policy Modelling, Paris June 30-July 2, 2004.

Van Wijnbergen, S. (1986). Aid, export promotion, and the real exchange rate: an African dlema. Center for Economic Policy Research. London

Weiss, J. (1992). Export response to trade-reforms: recent Mexican experience. Development Policy Review, 10(1), 43-60. doi. 10.1111/j.1467-7679.1992.tb00004.x

Wignaraja, G. (2007). Foreign ownership, technological capabilities, and clothing exports in Sri Lanka. Asian Development Bank Institute Discussion Paper No. 82. ADB Institute, Tokyo. [Retrieved from].

White, H., & Wignaraja (1992). Exchange rates, trade liberalization, and Aid: the Sri-Lankan experience. World Development, 20(10), 1471-1480. doi. 10.1016/0305-750X(92)90067-6

World Bank, (2012). World development indicators. CD-Rom, Washington, DC, the World Bank.

Yi Lu, Q.L., & Zhou, Y. (2013). Do exports respond to exchange rate changes? inference from China’s exchange rate reform. University of International Business and Economics, Beijing, China and National University of Singapore, Singapore.

Younger, S. (1992). Aid and the Dutch disease: macroeconomic management when everybody loves you. World Development, 20(11), 1587-1597. doi. 10.1016/0305-750X(92)90016-O



  • There are currently no refbacks.


Journal of Economics Library - J. Econ. Lib. - JEL -

ISSN: 2149-2379

Editor: Secretarial:   Istanbul - Turkey.

Copyright © KSP Library