Zimbabwe`s import structure and its impact on economic growth (1980-2012)

Abstract

The study analyses the import structure of Zimbabwe since 1980 and examines its impact on economic growth using Vector Error Correction Model (VECM). During this period, the Government of Zimbabwe changed its economic policy from a government controlled economy to a one based on a free-market economy. The study uses a variety of analytical tools including Cointegration analysis, Granger causality tests, Vector Autoregressive (VAR), and Impulse Response Functions. The study sets four hypotheses for testing the impact of the import structure on economic growth (GDP); (i) whether imports of capital and intermediate goods positively affect economic growth, (ii) whether GDP and imports are cointegrated, (iii) whether there is a bi-directional causality between imports and growth, and (iv) whether investment (FDI and GDI), and Human Capital (Labour) positively affect economic growth. The study findings indicate that imports of capital goods can help Zimbabwe to achieve its long run level of economic growth while importation of consumption goods is detrimental to economic growth. In this regard, the study findings indicate that the government should 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; can have zero tariffs or reduce tariffs on capital goods while raising tariffs on consumption goods. The study findings also indicate that the government should select goods for tariff liberalization under TFTA negotiations or arrangements.