Relationship Between Gdp and Export

Topics: Economics, Economic growth, Economic development Pages: 5 (1114 words) Published: March 15, 2013
SOPHIA IBRAHIM Computer Science
This paper analyses the relationship between export and Economic growth of Tanzania and evaluate the relationship of these variables for the period of 2000-2010.It is observed from the data obtained from National Bureau of Statistics website that export is increasing for the period of ten years from(2000 – 2010) likewise GDP is increasing. Therefore these two items relate to each other. It can be concludes that policy makers has to establish strong policies to promote both agriculture and manufacturing as they have influence in GDP and all these promote export trade. Key words: Export and GDP

1.0 Introduction
After Independency Tanzania adopted socialist economic policies where all major means of production and economy was controlled by the government. This caused decline in agriculture production which resulted from high inflation rate and low export and real GDP growth. The economy growth slowed down between 1986 and 1995 due to economic reforms and agriculture liberalization. Since 1996, Tanzania has taken aggressive steps toward macroeconomic stabilization and structural reforms. Agriculture constitutes the most important sector of economy providing about27% of GDP and 80% of workforce where cash crop including coffee, tea, cotton, cashewnuts, sisal, cloves and pyrethrum are used for export earnings. Mineral productions like gold, diamond and tanzanite presents biggest source of economic growth and provides over 3% of the GDP and accounts for half of Tanzania’s export. The export sector is very important to the African economy. As a result export expansion represents an important source of economic growth. Most African countries have small and poorly developed domestic markets and must rely on foreign markets for the sale of their excess production. (Mbaku, 1989). Tanzania recognized the role of exports that led to country being competitive and have a sustainable level of growth through the establishment of Export processing zone (EPZ) in 2002 which aimed to attract and promote investment for export led industrialization, increase foreign exchange earnings, create employment opportunities, encourage transfer of new technologies and promote processing of local raw materials for export (value addition).

Even now fast growth of China and India is believed to be contributed among other things by the expansion of their export, “The success of China and India largely caused by both the export led growth and access to technology through globalization” (Stiglitz, 2007). Exports imply access to the global market and permit increased production while trade encourages efficient allocation of resources; and trade contributes to economic growth by generating long-run gains (Easterly, 2007)

2.0 Objectives and Justifications
The objective of this paper is to investigate the impact of export on the economic growth of Tanzania from the period between 2000 and 2010. It analyses the relationship among gross domestic product and export in Tanzania by using time series data and then to evaluate the relationship between these variables.

There are several studies conducted on the exports and economic growth, some of them are country specific and some are conducted on different economic regions. Most of them have found strong positive relationship between the export and economic growth for example Balassa (1978), Jung and Marsahll (1985), Keonget. al. (1998), McCarville and Nnadozie (1995). The relevance of the study is to help the policy makers to have better insights into economic growth and to formulate effective economic policies and also to promote export trading, human capital and improve technology transfer.

3.0 Methodology
Through documentary review, previous researches have adopted different econometric approaches and methods to test long run relationship and causal relationship between GDP and export and...

References: Shombe, N. H. (2008) Causality Relationships between Total Exports with Agricultural and Manufacturing GDP in Tanzania, Institute of Developing Economies, Discussion Paper No.136
Stiglitz. J. E. (2007): Making Globalization Work for Developing Countries. W.W
Norton & Company, Inc.
Czinkota, Michael R., Ilkka A. Ronkainen and Michael H. Moffett. Fundamentals ofInternational Business. Mason: South-Western, 2004.
Kalirajan. K.P and Shand.R.P. (1994). “Economics in Disequilibrium. An Approach from the Frontier”. MacMillan India.
FouadAbou-Stait(2005)Are Exports the Engine of Economic Growth? An Application of Cointegration and Causality Analysis for Egypt, 1977-2003.
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