Casuality Relationship between International Trade and Economic Growth in Tanzania Using Time Series Data from 2001 – 2020

Nassibu Richard Mwaifunga
Faculty of Art and Social Sciences
Department of Economics and Community Economic Development
Open University of Tanzania
Nassibu.accademics@yahoo.com

Abstract: International trade plays a pivotal role in boosting productivity in business as well as economic growth. Its importance cannot be overemphasized. However, there is a mixed results on the effect of the international trade on the economic growth worldwide, whereby some studies support positive impact and other studies explain negative impact. This paper examines the causality relationship between international trade and economic growth in Tanzania. The paper used time series data spanning from 2001 to 2020. The data was sourced from Bank of Tanzania, and World Bank Development Indicators. Economic growth was captured using GDP, while international trade was captured using net imports of goods and services, and net exports of goods and services. The paper employed descriptive analysis and granger causality test under methodology to check for the existing causal relationship between net imports, net exports of goods and services and economic growth. The findings revealed that there is a significant causality that runs from net exports of goods and services to economic growth, net imports of goods and services to economic growth. Findings also show that there is a significant causality that runs from economic growth to net exports of goods and services and net imports of goods and services to net exports of goods and services. This means that international trade has significant influence on the economic growth of the country. This paper recommends for the policymakers to prioritize initiatives that improve export performance in order to promote economic growth.