Examining the determinants of import demand in Tanzania: An ARDL approach


Abstract

Objective: This study estimates the determinants of import demand in Tanzania using time-series data for the period from 1985 to 2015.

Research Design & Methods: The study applied the ARDL approach on Tanzania’s time-series data to examine the key drivers of import demand. The study used both aggregate import demand model (i.e., Model 1) and disaggregated import demand models, i.e., Model 2 (for consumer goods), Model 3 (for intermediate goods) and Model 4 (for capital goods) to examine this linkage.

Findings: The study found that in Model 1, aggregate imports in Tanzania are positively influenced by investment and exports, and negatively determined by trade policy. In Model 2, it was found that imports for consumer goods are positively influenced by consumer spending and foreign reserves, but negatively influenced by trade policy. In Model 3, imports for intermediate goods were found to be positively influenced by exports in the long run. Finally, in Model 4, the study found imports for capital goods to be positively influenced by exports (in the short- and long-run), but negatively influenced by investment (in the short-run).

Implications & Recommendations: The study recommends that policymakers in Tanzania should strengthen their macroeconomic policies to ensure that their imports are not consumption-based and have an enhancing effect on the country’s economic activities.

Contribution & Value Added: The study contributes to the empirical body of knowledge by incorporating various components of disaggregated import demand. This is an aspect that is scant in the existing literature as most previous studies only focused on aggregate import demand.


Keywords

aggregate Imports; disaggregated Imports; Tanzania; ARDL; error correction model

Adam, A., Katsimi, M., & Moutos, T. (2011). Inequality and the import demand function. Oxford Economic Papers, 10(1), 367-384. DOI:10.2307/41683139

Agbola, F. W. 2009. Aggregate Imports and Expenditure Components in the Philippines: An Econometric Analysis. Indian Economic Review, 44 (2), 155-170. https://www.jstor.org/stable/29793938

Alesina, A., & La Ferrara, E. (2000). Participation in heterogeneous communities. Quarterly Journal of Economics, 115 (3), 847-904. https://doi.org/10.1162/003355300554935

Anaman, K. A., & Buffong, S. M. (2001). Analysis of determinants of aggregate import demand in Brunei Darussalam for 1964 to 1997. Asian Economic Journal 15(1), 61-70. https://doi.org/10.1111/1467-8381.00123

Arize, A. C., & Malindretos, J. (2012). Foreign exchange reserves in Asia and its impact on import demand. International Journal of Economics and Finance, 4(3), 21-32. http://dx.doi.org/10.5539/ijef.v4n3p21

Bakari, S., & Mabrouki, M. (2017). Impact of exports and imports on economic growth: new evidence from Panama. Journal of Smart Economic Growth, 2(1), 67-79.

Bathalomew, D. (2012). An econometric estimation of the aggregate import demand function for Sierra Leone, Journal of Monetary and Economic Integration, 10(4), 5-24.

Budha, B. (2014). The role of expenditure components in Nepal’s import from India. South Asia Economic Journal, 15(1), 37-54. https://doi.org/10.1177%2F1391561414525720

Busse, M., & Koeniger, J. (2012). Trade and economic Growth: A re-examination of the empirical evidence. SSRN Electronic Journal. http://dx.doi.org/10.2139/ssrn.2009939

Chimobi, O. P., & Ogbonna, B. B. C. (2008). Estimating aggregate import-demand function in Nigeria: a co-integration approach. Journal of Research in National Development, 6(1), 170-182. DOI:10.4314/jorind.v6i1.42411

Dutta, D., & Ahmed, N. (2004). An aggregate import demand function for India: a co-integration analysis. Applied Economic Letter, 11(10), 607-613. http://dx.doi.org/10.1080/1350455042000271134

Fukumoto, M. (2012). Estimation of china’s disaggregate import demand functions. China Economic Review, 23(2), 434-444. https://doi.org/10.1016/j.chieco.2012.03.002

Fatukasi, B., & Awomuse, B. O. (2011). Determinants of Import in Nigeria: Application of Error Correction Model. Centrepoint Journal, Humanities Edition, 14 (1), 52-72.

Hossain, S., Sen, K. K., Abedin, T., & Chowdhury. M. S. R. (2019). Revisiting the import demand function: a comparative analysis. Dynamic econometric models, 9, 5-27. DOI:10.12775/DEM.2019.001

Huang, L. C., & Chang, S. H. (2014). Revisit the Nexus of Trade Openness and GDP Growth: Does the financial System Matter? The Journal of International Trade & Economic Development, 23, 1038-1058. https://doi.org/10.1080/09638199.2013.830638

Mishra, P. K. (2012). The dynamics of the relationship between imports and economic growth in India. South Asian Journal of Macroeconomics and Public Finance, 1(1), 32-45. DOI:10.1177/227797871200100105

Msaraka, S. S., & Hongzhong, Z. (2015). Economic growth and trade performance in Tanzania. Developing Country Studies 5(18), 142-149.

Narayan, P., & Smyth, R. (2005). The determinants of aggregate import demand in Brunei Darussalam: an empirical assessment using a cointegration and error correction approach. The Singapore Economic Review, 50(2), 197-210. https://doi.org/10.1142/S0217590805001974

Narayan, S., & Narayan, D. (2010). Estimating import and export demand elasticities for Mauritius and South Africa. Australian Economic Papers, 49(3), 241-252. https://doi.org/10.1111/j.1467-8454.2010.00399.x

Mansi, N., & Nteegah, A. (2016). Analysis of factors influencing import demand in Nigeria. International Journal of Arts Humanities and Social Sciences, 1(5), 33-42.

Omoke, P. C. (2012). Aggregate import demand and expenditure components in Nigeria. AUDCE, 8(1), 150-163.

Pesaran, M. H., & Pesaran, B. (2009). Time Series Econometric using Microfit 5.0. Oxford University Press: Oxford.

Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326. https://doi.org/10.1002/jae.616

Razafimahefa, I. F., & Hamori, S. (2005). Import demand function: some evidence from Madagascar and Mauritius. Journal of African Economies, 14(3), 411-434. http://dx.doi.org/10.1093/jae/eji014

Samuel, G. M. (2015). Trade liberalization and disaggregated import demand in Uganda. Modern Economy, 6(3), 317-337. http://dx.doi.org/10.4236/me.2015.63030

United Nations Conference on Trade and Development database (2015). Retrieved from http://www.unctadstat.unctad.org, October 2018.

World Bank (2016). World Bank Indicators. Retrieved from http://www.worldbank.org/indicators, September 2017.

Yahia, A. F. (2015). An econometric estimation and evaluation of the import function in the Libyan economy. Journal of Economics, Business and Management, 3(10), 995-998. http://dx.doi.org/10.7763/JOEBM.2015.V3.322

Zahonogo, P. (2016). Trade and economic growth in developing countries: evidence from Sub-Saharan Africa. Journal of African Trade, 3(1-2), 41-56. https://doi.org/10.1016/j.joat.2017.02.001


Published : 2022-03-31


VacuN. P., & OdhiamboN. M. (2022). Examining the determinants of import demand in Tanzania: An ARDL approach. International Entrepreneurship Review, 8(1), 65-75. https://doi.org/10.15678/IER.2022.0801.05

Nomfundo Portia Vacu  vacunp@unisa.ac.za
Department of Economics, University of South Africa  South Africa
http://orcid.org/0000-0003-4518-7764

Lecturer at the University of South Africa (South Africa). Her research interests include international economics, macroeconomics, and public economics.


Nicholas Mbaya Odhiambo 
Department of Economics, University of South Africa  South Africa
http://orcid.org/0000-0003-4988-0259

Professor of Economics & Head: Macroeconomic Policy Analysis (MPA) Programme, University of South Africa. His research interests include development economics, macroeconomics, international economics, and monetary Economics.






Creative Commons License

This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.

1. The author agrees to publish his article free of charge in the journal "International Entrepreneurship Review" (IER) in the language of the above publication (English). The editorial staff reserves the right to shorten texts and to change titles.

2. The journal allows the authors to keep their copyrights (the copyright) in accordance with the license: Creative Commons CC BY 4.0 from 2023 (since vol. 9, no 1). By the end of 2022 we published under Creative Commons CC BY-ND 4.0.

Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) only the final version of the article, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access). We advise to use any of the following research society portals:

- ResearchGate
- SSRN
- Academia.edu
- Selected Works
- Academic Search