Trade Balance Analysis in Zimbabwe: Import and Export Examination Using Vector Auto-Regression Model

Zimbabwe, just like many other developing nations have failed to register a positive trade balance for the past decade. Zimbabwe, is then labelled a net-importer or a permanent net-importer, since imports have always been greater than exports. Despite differences in value of imports and exports, quality is also essential to determine the country’s development path. The trade balance is affected by both international and domestic events. Chief exports for Zimbabwe remains primary products which are unprocessed, while the country imports finished products which have been value-added. The study seeks to analyse the trade balance over the years 1980 to 2017, paying particular attention to the periodic trends. The study also explore the relationship between the trade balance components, being imports and exports. The study employed a trend analysis and a statistical analysis to attain its study objectives. The study noted a general rise in both exports and imports, however imports significantly above imports for the entire study period, whether for merchandise or non-merchandise. ADF unit root tests were applied to time series data and variables were found to be integrated of order one. Imports have been found to Granger cause exports while exports Granger cause imports as well. Johansen Cointegration test shows that exports and imports are cointegrated, however using the VAR model, the error correction term was insignificant, discarding the existence of a longrun relationship. Exports levels are affected by its past values and also past values of imports significantly. Imports are also affected by historical exports significantly. Improvement in export policy is critical, value addition to exports, market fetching through regionalism and import substitution is essential to manage the trade balance.