The relationship between exports and economic growth: testing export led growth hypothesis for Tanzanian economy

The objective of this study was to examine the relationship between exports and economic growth in the Tanzanian economy thereby testing the export led growth hypothesis (ELGH). Ordinary Least Square (OLS) method was used as an estimation technique after adding exports and imports to the general production function which originally comprise of labour and capital. The empirical results have shown that the ELGH hypothesis is valid for Tanzania. The results show exports and gross fixed capital formation have significant positive relationship with economic growth while labour force and imports have significant negative relationship with the economic growth. The study concludes that, exports not only remain very important aspect in determining the overall rate of growth of output in the long run, but also remain as a significant variable in the growth process of Tanzania. The study recommends; the government to create enabling environment to farm producers and small and medium enterprises (SMEs) so that they meet the international market requirements which seemed to be very strange to products originating from developing countries; Foreign direct investment (FDI) should be attracted to cash crop plantations and agro processing industries; and Trade should be mainstreamed into various sectoral development policies and national strategic plans so that buy-in is obtained from most government ministries and institutions.