Examining the long run relationship between import structure and economic growth in Zimbabwe

Abstract

The article applies a Vector Error Correction Model (VECM) to examine the long run relationship between Zimbabwe's import structure and economic growth. The research findings indicate the presence of cointegration between imports and economic growth in Zimbabwe. In other words, there exists a long run relationship between economic growth and imports in Zimbabwe. The results farther show that increased imports of capital goods can help Zimbabwe achieve its long run level of economic growth while importation of consumption goods is detrimental to economic growth. The current level of capital goods imports relative to consumption goods imports is lower than what the country requires in order to achieve the long run economic growth level. In this regard, the article recommends the government to establish policies that promote imports of capital goods while discouraging imports of consumption goods. One way of doing this is to have selective tariff rates across imported goods, have zero tariffs or reduce tariffs on capital goods while raising tariffs on consumption goods. The article also recommends that the government should select goods for tariff liberalisation under the current Tripartite Free Trade Area (TFTA) negotiations, that is, tariff liberalization should be biased towards capital goods.