Analyzing the Interplay of International Trade and Economic Growth in Tanzania:

Abstract

In today’s interconnected world, no country can thrive in economic isolation. All aspects of a nation’s economy including industries, service sectors, income and employment levels, and living standards are tied to the economies of its trading partners. This interconnectedness drives the global flow of goods, services, labor, technology, investments, and business ventures. National economic policies are often crafted with an eye on the economic conditions of other countries to better meet domestic needs. Consequently, international trade plays a significant role in promoting economic growth. Numerous empirical studies have examined the relationship between international trade and economic growth, yet they often present mixed results. This discrepancy prompted this research, which investigates how international trade influences economic growth in Tanzania. Using exports and imports of goods and services as key variables, with interest rates and inflation as control variables, and GDP as the outcome measure, the study analyzed data from the World Bank and National Bureau of Statistics over a decade (2010–2020). The analysis, employing the Ordinary Least Squares (OLS) method, found that exports positively impact Tanzania’s economic growth, while imports, exchange rates, and inflation do not significantly affect it. These findings align with Mercantilist and staple theories of trade, which view international trade as a catalyst for growth. The study suggests that while international trade is crucial for Tanzania's economic progress, the country should focus on increasing exports, fostering local production, and investing in science and technology to strengthen its global competitiveness.