Assessing the Effect of Tobacco Exports on Economic Growth in Tanzania: A Vector Autoregressive Approach

This article examined the contribution of tobacco exports to the Tanzanian economy using time series data from the Bank of Tanzania and World Bank databases, applying a vector autoregressive model for the period from 1997 to 2024. The article provided a balanced description of the economic effects of tobacco exports and their perverse impact on economic growth while controlling for foreign direct investment, inflation and taxes on exports. Findings revealed that even though tobacco exports can accelerate the growth of gross domestic product (GDP) in the short term, they are faced with the problem of market saturation as well as anti-smoking campaigns in the long term. Early increases in the value of tobacco exports will lower GDP and later will have a positive effect of approximately 2.6% on GDP growth. The findings emphasized the significance of an export-led growth strategy along with macroeconomic policies that are balanced to circumvent risks. JEL Classification: Q22