Agricultural Trade and Economic Growth in East African Community

Abstract

East African Community states, as many other states in the region, depend largely on agricultural activities to boost their economic growth and create employment. Up to 80 per cent of the populace depends on agriculture directly and indirectly for  food, employment and income, while about 40 million people in EAC suffer from  hunger. The role of trade in economic growth and vice versa cannot be over  emphasized. However, whether there is any link between EAC’s regional trade and the region’s economic growth remain unknown. This study therefore investigated the relationship of the agricultural trade with economic growth in East African  Community. Several bi-variate Vector Auto-Regressive (VAR) and Vector Error  Correction Models (VECM) were also estimated. Granger causality test and  Impulse response analysis on trade and economic growth were performed using  panel data from UNCOMTRADE, International Financial Statistics and World  Development Indicators for the period 2000 – 2012 on the five EAC members and other 77 trade partners. Empirical findings showed mixed results for the different EAC member states. There existed bi-directional relationship between agricultural exports and economic growth in Kenya, uni-directional relationship in Rwanda, and no relationship at all in Burundi, Tanzania and Uganda.

Keywords: Agricultural Trade, Economic Growth, East African Community, Regional Integration.