Assessing the impact of exports and imports on economic growth: a case study of Malawi from 1970 to 2010
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Date
2013
Authors
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Journal ISSN
Volume Title
Publisher
University of the Western Cape
Abstract
In line with neoclassical economic growth propositions that outward-orientation fosters economic growth, since independence from Britain in 1964 the Government of Malawi has placed international trade at the centre of its economic development agenda. In spite of this theoretical affirmation of the trade-growth relationship, some empirical studies that have been done both in the country and abroad show contrary results. This prompted this study to be undertaken with the aim of assessing the impact of exports and imports on economic growth in Malawi from 1970 to 2010.This study has used a neoclassic economic growth model containing gross domestic product, exports, imports, capital and labour force as variables of analysis. After collecting annual time series data on the variables for the period 1970 to 2010 from the World Bank online statistical data base, Ordinary Least Squares regression and several econometric tests were run on the model to ensure robust and accurate results. Statistical accuracy of the findings was further cemented by use of the 5 percent level of significance. Exports were found to have a positive and statistically significant effect on the country’s economic growth, while imports had a negative and insignificant influence. Similarly, capital and labour force showed a positive effect on economic growth even though the capital’s effect was statistically insignificant. Nevertheless, the study also strongly confirmed the presence of a long-run equilibrium among the variables. The above results strongly suggest that Malawi should continue with its export-led economic growth strategies such as the Economic Recovery Plan (ERP) and the Malawi Growth and Development Strategy (MDGS). However, if the two economic development plans are to bear fruit this study strongly urges Malawi to consider diversifying its economy away from primary export production and instead embark on value-addition. Furthermore, the country should not only reduce the importation of consumer goods in favour of capital goods, but also improve the quality of the labour force and capital formation, if Malawi is to realise its economic development and poverty alleviation aspirations.
Description
Magister Artium (Development Studies) - MA(DVS)
Keywords
Economic growth, Exports, Export-led growth, Malawi