Impact of trade reform on coffee in Tanzania: A time series Analysis

Abstract

This study empirically investigates the impact of Tanzania’s trade reforms on coffee export. The study employs a time series analysis from 1970 to 2010. Sources of data are from Food and Agriculture Organization data base, Ivan Kushnir's Research Center and World Economic Indicators data base. Specifically, the study uses coffee export earnings as dependent variable whereas world price, real exchange rate, coffee production and trade reform (dummy variable) as independent variables to examine the impact of trade reform on coffee. The empirical investigation done in this paper employed cointegration and error correction modeling (ECM) as well as trend analysis using EViews 7. The results suggest that, world price, real exchange rate, coffee production in metric tons and trade reform (dummy variable) have greater impact on coffee export earnings in Tanzania. Interestingly, world price and coffee production have most significant impacts on coffee export earnings both in long run and short run. However, real exchange rate and dummy variable have positive impacts on coffee export earnings but statistically insignificant. Error correction term found with the expected sign and quickly adjusted to the long run equilibrium at the speed of 98.2 percent per annum. Trend analysis reveals that, trade reform has a positive impact on coffee export an earnings since the trending coefficient has a positive sign as such has an upward trending.

Keywords: Trade reform or trade liberalization, agricultural export, coffee and time series analysis.