Unveiling the Agriculture -Trade-Capital Dynamics Nexus in Tanzania: A Structural Approach to Sustainable Economic Growth

This study investigated the dynamic interplay between agricultural output, trade, capital formation, household consumption expenditures, and sustainable economic growth in Tanzania.Using a Vector Error Correction Model (VECM) and analyzing time-series data from 1970 to 2022, the study differentiates between short-term fluctuations and long-term equilibrium relationships.The Johansen cointegration test confirmed a stable long-run association, indicating that changes in these economic drivers are gradually corrected towards equilibrium over time.Empirical findings revealed that agricultural output (0.5264, SE = 0.1375), capital formation (0.4027, SE = 0.0305), and household expenditure (1.8771, SE = 0.1125 positively contributed to GDP growth, reinforcing the role of investment and agricultural productivity in long-term economic expansion.Conversely, trade (-2.2065,SE = 0.2048) exerted a negative impact, suggesting persistent trade imbalances and constrained savings that hinder sustainable growth.The short-run analysis highlights the speed of adjustment, with deviations from equilibrium being gradually corrected over time.These findings underscored the importance of strategic policy interventions, including export diversification, industrial policy reforms, investment incentives, and agricultural modernization.By addressing trade inefficiencies and promoting productive investment, Tanzania can strengthen economic resilience and foster sustainable growth.This study provides empirical insights for policymakers and contributes to the broader discourse on structural economic transformation in developing economies.