Author: Nassibu Richard Mwaifunga (Open University of Tanzania)
Abstract: This study examined the effect of exports and imports on economic growth in Tanzania, using quarterly time series data for 2001Q1–2020Q4. Drawing on Ricardian Comparative Advantage and Export- Led Growth (ELG) theory, the analysis employed an Autoregressive Distributed Lag (ARDL) model and Granger-causality tests to identify both short-run dynamics and long-run relationships. Descriptive statistics reveal steady but shock-prone growth, a persistent trade deficit (ln imports > ln exports) and notable exchange-rate and inflation variability. Granger-causality results show bidirectional predictive links between exports and growth and one-way causality from imports to growth. ARDL long-run estimates indicate that exports and a more depreciated exchange rate (higher ln TZS/USD) are associated with higher growth whereas imports are negatively associated with growth once exports and macro controls are held constant; inflation is positively associated with growth, consistent with pro-cyclical price behavior, while foreign direct investment (FDI) is statistically insignificant. Short-run results show that export shocks are initially contractionary, import shocks expansionary and depreciation contractionary on impact, with a large and significant error-correction term implying rapid convergence to the long-run path. The findings support a calibrated ELG strategy that emphasizes export diversification and value addition, careful management of import composition and exchange-rate and macroeconomic policies that safeguard competitiveness and external sustainability in Tanzania.