Abstract:
Agricultural sector in Tanzania employs over 65% of the Tanzania population (NBS,
2017 and contributes to foreign exchange earnings through crops exports. This study
aimed at examining the effect of agricultural export values to Tanzanian foreign
exchange rate and assessed if there is long-run relationship between agricultural
exports value and foreign exchange rate using secondary data on total exports,
agricultural exports, imports and foreign exchange data from 1989/1990 to
2018/2019. The Regression analysis, Unit Root Test, Johansen Test, Vector
Autoregression and Granger causality test were used for analysis. The study
concludes that, both total imports and total exports have significant influence on
Tanzania exchange rate. Furthermore, it was observed that, there is a causality
between total agricultural exports and foreign exchange rate in Tanzania whereby,
foreign exchange rate causes agricultural exports and not otherwise. Also, the
causality between total imports and total exchange rate is that total import cause’s
foreign exchange rate in Tanzania. Regarding the long run relationship between
agricultural exports value and foreign exchange rate in Tanzania, it was observed that
there is long-run relationship that exists between agricultural export value and
foreign exchange rate in Tanzania. The conclusions obtained in this study are very
useful for policy making especially on use of foreign exchange rate to stimulate
exports. For the Tanzania case, it was observed that devaluation will increase
agricultural exports and not total exports. Also, regarding to imports, it was observed
that, the total imports have negative impact on Tanzania Shilling hence effort to
reduce imports pressure should be implemented to reduce importation.
