Impact of international trade on economic growth of Tanzania
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Date
2020
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Publisher
Mzumbe University
Abstract
Tanzania as an open economy engages herself in international trade which constitutes significantly a proportion of the country’s aggregate output. As in other developing countries, Tanzania regards trade as the main instrument for the development and growth of the country. Different empirical studies explain the existing relationship between international trade and the country’s economic growth. However, the empirical findings produce mixed findings which then developed more curiosity to conduct this study. Under this review, the researcher examines the impact of international trade on the economic growth of Tanzania, whereby goods exports, service exports, goods imports, and service imports make the independent variables. Otherwise, interest rate and inflation rate are the control variables while GDP makes the dependent variable. The study employs a time-series data-set for 31 years (1988 to 2018) gathered from the World Bank data site. Besides, Ordinary Least Squares (OLS) method is used to estimate a multiple linear regressions model, and the findings suggest that goods exports and service exports have a positive and significant impact on the economic growth of Tanzania; goods imports, service imports and exchange rate have a negative but significant impact on the economic growth while the inflation rate has a negative but insignificant impact on the economic growth.
These findings correspond to the economic theories of international trade both classical and neoclassical theories which regard foreign trade as a catalyst for economic growth. However, foreign trade has both negative and positive impact on the growth of the economy. This study concludes that international trade plays a substantial role in the economic growth of Tanzania. Therefore the study recommends that the government of Tanzania should effectively enhance export promotion policies, import substitution strategy of industrialization, and strengthen investment in science and technology to increase Tanzania’s competitive edge in the international market
Description
A dissertation submitted to Mzumbe University ( DCC ) as a partial fulfillment of the requirements for award of Master’s degree of Science in Applied Economics and Business(MAEB ) of Mzumbe University.
Keywords
International trade, Developing countries, Economic growth
Citation
APA