Using a vector autoregressive approach on analysing the impact of regional trade on Tanzania economic growth
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Date
2024
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Publisher
International Journal of Development and Management Review
Abstract
The study focuses on examining the impact that regional trade has on Tanzania's economic growth, using data collected from 1960 to 2021. It also examines the causal relationship between merchandise imports and exports and their effects on Tanzania's GDP growth rate. To establish the causal relationship between merchandise imports and merchandise exports and their impact on GDP growth, a non-experimental research design was employed. The analysis was performed by employing Engle-Granger Cointegration, as it helps in ascertaining whether the variable exhibits long-run relationships. A Vector Auto-Regressive (VAR) model was also utilised, incorporating important macroeconomic variables such as merchandise import and merchandise export. The model's impulse responses are consistent with the gravity theory of trade. The findings indicate a positive relationship between the rates of merchandise import and export and the growth rate of GDP. Additionally, the lagged growth rate of GDP has an initial positive impact on GDP growth in the current year. The model's impulse responses are consistent with the gravity theory of economics. The findings show a direct correlation between merchandise import and export rates and GDP growth rates. The study therefore recommends that Tanzania's government should prioritise policy measures that promote exports and foster favourable conditions for imports, as these dynamics contribute to the country's GDP growth.
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Keywords
Engle-Granger Cointegration, merchandise imports and exports, Engle granger cointegration test, merchandize exports, merchandize import, pairwise causality test, Vector Auto-Regressive, The Gravity Model, The Comparative Advantage Theory, Augmented Dickey-Fuller (ADF) Test, Pairwise Wise Granger Causality, Vector Autoregressive Output
Citation
APA