The Effects of Exchange Rate on Export Performance in Tanzania

Abstract

The chapter analyzes the effects of exchange rate of Tanzanian shilling on the country's exports performance applying Vector Auto-Regressive (VAR) model covering the sample period from 1993:Q1 to 2016:Q4. Cointegration and causality tests are performed to investigate the short- and long-term relationships between the variables to evaluate the financial competition. The results show that; there is no long-term relationship (cointegration) between exchange rates and exports and between foreign demand and exports. Moreover, the results of causality test show no short-term relationship (causality) between exchange rates and exports and between foreign demand and exports. As the findings suggest, the exchange rate level of Tanzanian shilling (in nominal terms) does not statistic-significantly affect the country's exports performance.