Determinants of Exports of Four Members of COMESA: A Gravity Approach

Abstract

Exports play a very predominant role in COMESA’s economy, impacting the level of economic growth, the Balance of Payments and employment. COMESA has commenced in several trade policy reforms focused on boosting the export sector. However, COMESA’s share in total world exports is nevertheless very low. Given the central role of exports in the economy, it is significant to pinpoint the probable elements influencing export flows between four countries which are selected for this research from the COMESA (Kenya, Egypt, Uganda, and Zambia) and their 70, 50, 30 top trading partners and EU-28. Thus, this research examines the factors that determine the exports of the four countries from the COMESA region using an augmented gravity approach. The panel data set used is for the period 1999 to 2017. As mentioned above, exports play an important role in COMESA’s economy, by impacting the volume of economic growth, hiring and the Balance of Payments. Accordingly, in this study, a gravity approach is employed to analyze the main factors facing the exports of the four countries from the COMESA to their major trading partners. The Gravity Model was employed in the examination of mirror data to discover the actual determinants of exports among COMESA’s four selected countries (Egypt, Kenya, Zambia, and Uganda) and their bilateral trading partners. Hausman test outcomes showed that the Random Effect Model (REM) was most acceptable for our data. Empirical results show that GDP had a significant positive result on exports for all four selected countries (Egypt, Kenya, Zambia, and Uganda). Also, the results show that the distance between the four selected countries and their trading partners had a significant negative effect on the four countries. GDP had a statistically positive impact on their 30, 50 and 70 top trading partners and EU-28 for all the selected countries. The population of the exporter (Egypt) and that of the importers (the top 30, 50, 70 trading partners, and EU-28) had a positive and statistically significant at the 1% level impact on the 30, 50, 70 country data sets for Egypt. Kenya’s GDP per capita has a significant and negative impact while the importers’ GDP per capita has a significant positive impact on Kenya’s exports. The GDP per capita of Uganda and Zambia and that of the importers both have a significant negative impact on the EU-28 data set, the 30, 50, 70 country data sets. The exchange rate has a significant positive impact on the top 30, 50 70 trading partners and EU-28 for Egypt and Zambia while for Uganda it has a significant positive impact on 30 country data set and EU-28 respectively. FDI has a significant positive impact on both EU-28 and the 30, 50, 70 country data sets for Egypt. It has a positive and insignificant result on the 70 country data set only for Kenya, while it has a negative and significant impact on the 50 and 30 country data sets for Uganda and for Zambia it has a negative impact for all the country data sets (30, 50, 70 countries and EU-28). Membership to COMESA trading blocs has a positive effect on the trades of all the four COMESA’s selected countries (Kenya, Egypt, Uganda, and Zambia). Colony was found to have a significant positive effect on the exports of all the four country data sets. Among the data sets used (30, 50, 70 and EU-28 data sets), the top 30, 50 and 70 trading partners’ data sets were found to be the most appropriate in explaining bilateral trade flows for Egypt, Kenya, Zambia, and Uganda. In conclusion, this study highlights the factors that influence COMESA’s four selected members’ exports. The factors that have a positive effect on the exports of Egypt, Kenya, Uganda, and Zambia should be promoted. This study shows that the formation of COMESA has a significant positive effect on its members’ exports. The results suggest that in order to enhance their export flows, the process of economic integration should be enhanced.