IDEAS home Printed from https://ideas.repec.org/p/zbw/ifwedp/201647.html
   My bibliography  Save this paper

Global shocks and their impact on the Tanzanian Economy

Author

Listed:
  • Haile, Fiseha

Abstract

Plummeting commodity prices, China's economic malaise, and global financial market turbulence have recently wreaked havoc on African economies. This paper investigates whether, and to what extent, these intertwined shocks spillover into the Tanzanian economy. The author finds that a 1 percentage point (ppts) drop in China's investment growth is associated with a decline in Tanzania's export growth of roughly 0.60 ppts. A 1 percent fall in commodity prices leads to 0.65 percent lower exports value. The results suggest that a hard landing of the Chinese economy to its 'new normal' would doubtless send shock waves through the Tanzanian economy by further driving down commodity demand and prices as well as lowering development finance. In contrast, financial market volatility has a fairly negligible impact on economic growth. The main results stand up well to a wide-array of robustness checks.

Suggested Citation

  • Haile, Fiseha, 2016. "Global shocks and their impact on the Tanzanian Economy," Economics Discussion Papers 2016-47, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwedp:201647
    as

    Download full text from publisher

    File URL: http://www.economics-ejournal.org/economics/discussionpapers/2016-47
    Download Restriction: no
    File URL: https://www.econstor.eu/bitstream/10419/148275/1/873247841.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Spanos, Aris, 2009. "The Pre-Eminence of Theory versus the European CVAR Perspective in Macroeconometric Modeling," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-14.
    2. Hausmann, Ricardo & Fernández-Arias, Eduardo, 2000. "Foreign Direct Investment: Good Cholesterol?," IDB Publications (Working Papers) 1319, Inter-American Development Bank.
    3. Johansen, Soren & Juselius, Katarina, 1994. "Identification of the long-run and the short-run structure an application to the ISLM model," Journal of Econometrics, Elsevier, vol. 63(1), pages 7-36, July.
    4. David Hendry & Jurgen A. Doornik & Felix Pretis, 2013. "Step-indicator Saturation," Economics Series Working Papers 658, University of Oxford, Department of Economics.
    5. Gonzalo, Jesus, 1994. "Five alternative methods of estimating long-run equilibrium relationships," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 203-233.
    6. Johansen, Soren, 2000. "Modelling of cointegration in the vector autoregressive model," Economic Modelling, Elsevier, vol. 17(3), pages 359-373, August.
    7. Juselius, Katarina, 2006. "The Cointegrated VAR Model: Methodology and Applications," OUP Catalogue, Oxford University Press, number 9780199285679.
    8. Kevin D. Hoover & Soren Johansen & Katarina Juselius, 2008. "Allowing the Data to Speak Freely: The Macroeconometrics of the Cointegrated Vector Autoregression," American Economic Review, American Economic Association, vol. 98(2), pages 251-255, May.
    9. Mr. Paulo Drummond & Miss Estelle X Liu, 2013. "Africa’s Rising Exposure to China: How Large Are Spillovers Through Trade?," IMF Working Papers 2013/250, International Monetary Fund.
    10. Ricardo Hausmann & Eduardo Fernández-Arias, 2000. "Foreign Direct Investment: Good Cholesterol?," Research Department Publications 4203, Inter-American Development Bank, Research Department.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alice Nicole Sindzingre, 2021. "Economic Relationships Between Sub-Saharan Africa and China: An Alternative Theoretical and Policy Paradigm?," Post-Print halshs-03625159, HAL.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Juselius, Katarina & Dimelis, Sophia, 2019. "The Greek crisis: A story of self-reinforcing feedback mechanisms," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 13, pages 1-22.
    2. Ordóñez, Javier & Jusélius, Katarina, 2009. "Balassa-Samuelson and Wage, Price and Unemployment Dynamics in the Spanish Transition to EMU Membership," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-30.
    3. Haile, Fiseha, 2017. "Global shocks and their impact on the Tanzanian economy," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 11, pages 1-38.
    4. Juselius, Katarina & Stillwagon, Josh R., 2018. "Are outcomes driving expectations or the other way around? An I(2) CVAR analysis of interest rate expectations in the dollar/pound market," Journal of International Money and Finance, Elsevier, vol. 83(C), pages 93-105.
    5. Katarina Juselius & Niels Framroze Møller & Finn Tarp, 2014. "The Long-Run Impact of Foreign Aid in 36 African Countries: Insights from Multivariate Time Series Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 76(2), pages 153-184, April.
    6. Katarina Juselius & Abdulaziz Reshid & Finn Tarp, 2017. "The Real Exchange Rate, Foreign Aid and Macroeconomic Transmission Mechanisms in Tanzania and Ghana," Journal of Development Studies, Taylor & Francis Journals, vol. 53(7), pages 1075-1103, July.
    7. Colander, David C., 2009. "Economists, incentives, judgment, and the European CVAR approach to macroeconometrics," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-21.
    8. Katarina Juselius & Abdulaziz Reshid & Finn Tarp, 2017. "The Real Exchange Rate, Foreign Aid and Macroeconomic Transmission Mechanisms in Tanzania and Ghana," Journal of Development Studies, Taylor & Francis Journals, vol. 53(7), pages 1075-1103, July.
    9. Herzer, Dierk & Nunnenkamp, Peter, 2013. "Private Donations, Government Grants, Commercial Activities, and Fundraising: Cointegration and Causality for NGOs in International Development Cooperation," World Development, Elsevier, vol. 46(C), pages 234-251.
    10. Katarina Juselius, 2021. "Searching for a Theory That Fits the Data: A Personal Research Odyssey," Econometrics, MDPI, vol. 9(1), pages 1-27, February.
    11. Katarina Juselius, 2009. "Time to reject the privileging of economic theory over empirical evidence? A Reply to Lawson (2009)," Discussion Papers 09-16, University of Copenhagen. Department of Economics.
    12. Katarina Juselius, 2017. "Using a Theory-Consistent CVAR Scenario to Test an Exchange Rate Model Based on Imperfect Knowledge," Econometrics, MDPI, vol. 5(3), pages 1-20, July.
    13. Katarina Juselius, 2017. "A CVAR scenario for a standard monetary model using theory-consistent expectations," Discussion Papers 17-08, University of Copenhagen. Department of Economics.
    14. Barbara Dluhosch, 2011. "European Economics at a Crossroads, by J. Barkley Rosser, Jr., Richard P. F. Holt, and David Colander," Journal of Regional Science, Wiley Blackwell, vol. 51(3), pages 629-631, August.
    15. J. Barkley Rosser Jr & Richard P.F. Holt & David Colander, 2010. "European Economics at a Crossroads," Books, Edward Elgar Publishing, number 13585, March.
    16. Razin, Assaf & Goldstein, Itay, 2003. "An Information-Based Trade-off Between Foreign Direct Investment and Foreign Portfolio Investment: Volatility, Transparency and," CEPR Discussion Papers 3747, C.E.P.R. Discussion Papers.
    17. Fernandez-Arias, Eduardo & Hausmann, Ricardo, 2001. "Is foreign direct investment a safer form of financing?," Emerging Markets Review, Elsevier, vol. 2(1), pages 34-49, March.
    18. Faria, Andr & Mauro, Paolo, 2009. "Institutions and the external capital structure of countries," Journal of International Money and Finance, Elsevier, vol. 28(3), pages 367-391, April.
    19. Jose Perez-Montiel & Carles Manera Erbina, 2019. "Investment Sustained by Consumption: A Linear and Nonlinear Time Series Analysis," Sustainability, MDPI, vol. 11(16), pages 1-15, August.
    20. Sèna Kimm Gnangnon, 2020. "Trade Openness and Diversification of External Financial Flows for Development: An Empirical Analysis," South Asian Journal of Macroeconomics and Public Finance, , vol. 9(1), pages 22-57, June.

    More about this item

    Keywords

    China; Tanzania; commodity prices; investment; exports; cointegrated VAR model;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:ifwedp:201647. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/iwkiede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.