An Analysis of the Determinants of Maize Import Volumes in Kenya

Maurine Adhiambo Abodi,Gideon Aiko Obare,Isaac Maina Kariuki

doi:10.4236/tel.2021.112022

Abstract

The objective of our study is to investigate the key factors that determine maize import volumes in Kenya. To achieve this objective, we used time series secondary data from FAOSTAT, World Bank and World Trade Organization (WTO) for the period 1963 to 2016. We consider this period to be long enough to allow us to accurately capture the domestic maize price patterns before and after the onset of maize market reforms in Kenya. Our econometric analysis of the time series data using an error correction version of Autoregressive distributed lag model shows that maize import volume is determined by trade openness, domestic price of maize and gross domestic product in the long run. In the short run, the results show that maize import volume is determined by exchange rate, lag of exchange rate, lag of maize import volume and production. The findings suggest that to reduce overreliance on maize imports, effective management of macroeconomic environment should be stimulated to create a favourable environment for improving domestic maize production so as to discourage a surge in maize imports and at the same time improve the country’s food security.

Highlights

The importance of international trade in the process of development has for a long time been a topic of interest to international economists in both developed and developing economies (Fatukasi and Awomuse, 2011)
The coefficient of maize domestic price is 4.242% which is elastic and significant at 10% significance level signifying that a 1% increase in domestic maize price results into 4.242% increase in volume of maize imports, holding other factors constant
Unlike the current study which indicates that maize imports in Kenya can be significantly controlled using domestic price, the study by Khan and Hussain (2011) shows that tea imports in Parkistan cannot be significantly controlled by adjusting the domestic price

Summary

Introduction

The importance of international trade in the process of development has for a long time been a topic of interest to international economists in both developed and developing economies (Fatukasi and Awomuse, 2011). The attractiveness of globalization, liberalization and interdependence between countries has increased a great deal. This is evidenced by the rapid pace at which every country strives to achieve economic growth and development by attaining as much benefits from international trade as possible (Dao, 2016). According to FAO (2017), world maize imports totalled to US $32.3 billion in 2016. In Sub-Saharan Africa, about 30% of maize consumed in the region is imported compared to 5% in late sixties (FAO, 2017)

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Conclusion