Regional Trade and Economic Growth of East Africa Community States
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Date
2017-03
Authors
Maina, Joram Mburu
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
In light of the regional integration efforts, this study sought to find out the impact of
regional trade integration on economic growth of East Africa Community. One of the
provisions to increase the EAC intra-trade is Article 75 of the Treaty and the Customs
Union (CU) Protocol whose implementation would increase the value and volume of
trade within the EAC. GDP growth rate analysis shows a major disconnect between
deepening integration and achievement of growth within a common market stage. This
study was aimed at establishing a relationship between economic growth and regional
trade, and confirm whether intra-regional or trade between trade bloc members and other
independent countries has an impact on economic growth. The study covered the period
from 2001 to 2014 during which time the East Africa Community has been in existence
and having undergone various stages in integration. Secondary data from East Africa
Community Partner States database and World Bank Development Indicators database
have been used. A number of causality tests have been conducted to determine key
indicators of causality between growth and regional trade in the East Africa Community
region. Granger causality test was carried out between: regional trade and GDP and Total
trade and GDP for each of the regions member state. To determine which variable spurs
higher output, this research carried out a fixed effect technique. The study established that
the impact of regional trade on the growth of East Africa Community counties varies
among the member states. There is a direct link between GDP growth and regional trade
for the case of Kenya, Tanzania and Uganda while Burundi and Rwanda show no
significant relationship. Total trade and GDP growth have a bidirectional relationship in
the case of Kenya while for the rest of the member states the relationship is
unidirectional. The study also concludes that extra-regional trade spurs higher output than
intra-regional trade for the East Africa Community. Based on the results, this study
recommends that EAC governments should, therefore, implement policies that would
enhance regional integration as the results show that integration is likely to promote the
economic growth of the member states.
Description
A Research Project Submitted to the Department of Applied
Economics in Partial Fulfillment of the Requirements for the Award of Master of Economics (International Trade &
Finance) of Kenyatta University. March 2017