Determinants of Export in East Africa: Heterogeneous Panel Data Analysis

Abstract

Despite its vast agricultural potential, Africa’s balance of trade for at least three decades is in deficit, remained a net importer of agricultural products. Hence, it is worthy studying determinants of export in East Africa. This study employed world and Africa development indicator data for 37 years of 9 East African countries to study determinants of export. Descriptive result showed that Exports in East Africa remained low because domestic demand is high from high population of having low productivity. FDI is low. The pooled mean group estimation result shows that Real GDP of exporting and some importing countries, trade openness, labor supply, domestic demand and gross capital formation are variables which significantly affect export in East Africa in the short run. Similarly, Gross capital formation, Final consumption, foreign direct investment, real GDP of exporting countries, real GDP of importing countries and trade openness are variables that affect significantly export of East African countries in the long run. The study suggests that productivity of labor is too low and hence ways to improve is highly recommended. FDI though significantly affects Export both short run and long run is very low. Hence, ways to attract more FDI is highly recommended. Above all, Real GDP of both exporting and some importing countries significantly and positively affect export. Hence, both Supply side and demand side of export are equally important.