Analysis of the Determinants of Trade Balance: Case Study of Tanzania

The study focuses on the Analysis of the Main determinants that have an impact on trade balance. Specifically this study focus on the main cause of Trade deficit in Tanzania by analyzing the impact of Foreign Direct Investment(FDI),Human Capital Development(HCD),Household Consumption Expenditure(HCEXP), Government Expenditure (GEXP),Inflation (INF),Natural Resources Availability (NRA),Real Exchange Rate (REX) and Foreign Income(WY) and Trade Liberization (TLB) etc.In this study The Ordinary Least Square method (OLS) under the E-View 7.1 software has been used for the econometric analysis with a sample period spanning from 1980-2012. The literature reviews of the previous researchers have the mixed results on the factors in questions. However this study tried to use more variables that have rarely been explored specifically in Tanzania and found out that the main influencing factors for the case of Tanzania are Foreign Direct Investment(FDI),Human Capital Development (HCD),Household Consumption Expenditure(HCEXP), Government Expenditure (GEXP),Inflation (INF),Natural Resources Availability (NRA),Foreign Income(WY) and Trade Liberization(TLB) so suggested policy measures should focus on them to reduce the trade deficit in the Tanzanian economy.