Exploring the Dynamic Relationship Between Regional Exports and Economic Growth: A Panel Autoregressive Analysis of Kenya and Tanzania

What the paper says

Export led growth hypothesis and endogenous growth theory asserting that exports of goods and services and imports of capital goods can influence the economic growth.This paper investigates the dynamic relationship betwixt regional exports and growth of economy in East African countries particularly Kenya and Tanzania, grounded in the export-led growth hypothesis and endogenous growth theory.Utilizing a panel dataset from the World Development Indicators spanning 1970 to 2023, we analyze economic growth, proxied by GDP in current US dollars, alongside regional exports from Sub-Saharan Africa, South Asia, East Asia and Pacific, the Arab World and Imports.We utilize the Levin-Lin-Chu (LLC) test for assessing unit roots, as well as the Kao cointegration test to evaluate cointegration relationships.Thereafter panel ARDL-Pooled Mean Group (Panel-ARDL-PMG) was estimated.Empirical findings reveal that all variables are non-stationary at level and once differenced becomes stationary.Again, variables have long run relationship means are cointegrated.Employing the panel ARDL-Pooled Mean Group methodology, our findings indicate that exports from South Asia and East Asia and Pacific, along with imports, significantly contribute to economic growth, while exports from Sub-Saharan Africa and the Arab World adversely impact growth in the long run.In the short run, only imports and exports from the Arab World positively influence economic growth, whereas other regions hinder growth.These results suggest that policymakers should enhance international trade policies to boost export contributions to economic growth, particularly by focusing on improving export quality and diversifying trade partnerships.Strengthening these aspects can foster sustainable economic development in Kenya and Tanzania.