What determines Tanzania's trade? A gravity approach

Abstract

Based on the gravity model, this study examines the determinants of trade flows between Tanzania and its trading partners and attempts to predict the country's trade potential. Using a panel dataset of Tanzania's trade flows of 100 countries from 2000 to 2016, this study finds that the results are consistent with the predictions of the gravity model, with positive and negative coefficients for gross domestic product and distance, respectively. The predicted trade potential reveals that neighboring countries and some middle and superpowers have significant trade potential. Considering the important contribution of trade to economic growth and notwithstanding Tanzania's active membership in regional economic communities, such as the East African Cooperation, Southern African Development Cooperation, and the anticipated engagement in the African Continental Free Trade Agreement, this study provides policy recommendations to reduce trade barriers and diversify production to promote intra-African trade and enhance trade with the rest of the world.