Exports performance and its major determinants a case study of Tanzania

This study empirically investigates the performance of Tanzania’s export and its major determinants for the period 1980 to 2013. This was implemented by estimating the export functions which incorporate both the demand and supply factors. The two-step Engle-Granger technique was used to test cointegration of variables, and ultimately error correction models for export function were estimated using Ordinary Least Squares. The results that are based on long run cointegration equation show that openness, the real exchange rate, real Gross Domestic Product (GDP) and infrastructure development have a positive and statistically significant impact on the export performance in Tanzania. On contrary, inflation negatively affects exports, which is consistent with both economic theory and empirical evidence. Consequently therefore, policies that aim at improving trade openness, stabilize the real exchange rate, expanding output of the economy (GDP) are amenable to enhancing export performance and hence by extension economic growth and development for low income and poor country like Tanzania that have embraced trade liberalization. At the same time, inflation rate must be lowered and infrastructure improved to lower both the transaction and trade costs that boost exports that are critical for economic growth.