Abstract:
This study investigated the role that the EAC has played in the development of the
cross-border trade; while focusing on the impact of capital inflows, intra-trade and
the effect of inflation to export performance of Tanzania.
The study employed the Gravity Model theoretical framework which used the
gravity equation to describe the size of joint trade flows between two countries. The
data was analyzed using the estimation technique – Pooled Mean Group (PMG). The
study used a panel of four countries with annual data for the period 2003-2018 using
the PMG technique.
The outcomes of PMG revealed that FDI, GDP from the Partner States and inflation
have all a positive statistically significant relationship with Tanzania exports,
imports from the Partner States affects Tanzanian exports negatively except for
population variable. The results of the PMG in the short-run have revealed that;
changes in the rate of Rwanda’s import has a positive and statistically significant
impact to Tanzania exports; the economic growth of Uganda has had a negative
statistical significant relationship with Tanzania’s export performance. Otherwise,
the positive change in the economic growth of Tanzania statistically increases the
rate of export; and that, Burundi and Kenya have no short-run causality with the
Tanzania export rate because all the variables are not statistically significant.
The discoveries of this study have significant policy inferences to the economy of
Tanzania. The biggest constraint to the study was the fact that data were sourced
from diverse sources, which are conflicting, thus requiring an in-depth analysis to be
conducted first. Future research can expand the number of countries to include other
regional integrations that Tanzania is associated with, such as the Southern Africa
Development Community (SADC).