Tumaini, Henry Desdery
(2018)
Influence of Exchange Rate
Volatility on coffee exports in Tanzania from 1996 to 2016,.
Masters thesis, The Open University of Tanzania.
Abstract
This research broadly examines the influence of ERV on coffee exports in Tanzania
due to the fact that the contribution of coffee to the Tanzanian economy has shown a
fluctuating as well as a declining trend. The research was guided by two specific
objectives: The first objective was to examine the volatility of real exchange rate of
the currency of Tanzania and its influence on coffee exports between 1996 and 2016.
The second objective was to determine the responsiveness of coffee exports to
changes in other determinants of coffee exports apart from the exchange rate
volatility. The gravity model was used to analyse the relationship. Econometric
methods were used to estimate the gravity model using time series data for the
period 1996-2016. The empirical results of the study in general indicate that in the
long-run, variations in coffee exports are caused by variations in the ERV, nominal
GDP of Tanzania, the real exchange rate and terms of trade for Tanzania. While
short-run findings of this study show that, variations in coffee exports can be
explained only by variations in ERV or real exchange rate or both. The study draws
the following conclusion; stable exchange rate could be effective policy instrument
for promoting coffee exports in Tanzania. ERV could be reduced by putting in place
policies which are directed in strengthening and deepening the capital, financial and
currency market. The exchange rate movements should be in line with the
performance of the economy both domestically and externally. Improvement of
terms of trade for Tanzania and the nominal GDP of Tanzania has a positive
influence of coffee exports in the long-run. Therefore policies directed to improve
the terms of trade and promote economic growth will likewise improve the quantity
of coffee exports.
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