BINDURA UNIVERSITY OF SCIENCE EDUCATION

FACULTY OF COMMERCE
DEPARTMENT OF ECONOMICS
AN EMIPIRICAL MODELLING OF THE ZIMBABWEAN EXPORT
FUNCTION (1980-2008
BY
MAXWELL! " !MANGORO
B082#1$0
SUPERVISOR% MR! DENHERE
A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE
RE&UIREMENTS OF THE BACHELOR OF SCIENCE HONOURS DEGREE
N ECONOMICS OF BINDURA UNIVERSITY OF SCIENCE EDUCATION
AUGUST 2012
i
RELEASE FORM
NAME OF STUDENT% MAXWELL K MANGORO
DISSERTATION TITLE%
An empirical modelling of the Zimbabean e!port f"nction #$%&'( )''&*+
DEGREE TITLE% ,achelor of Science #-on.+* in Economic.
/ermi..ion i. here b0 granted to ,1N23RA 3N14ERS156 OF S71EN7E E237A51ON
to prod"ce .ingle copie. if thi. 2i..ertation and lend or .ell ."ch copie. for pri8ate9
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neither the di..ertation nor e!ten.i8e e!tract. from it ma0 be printed or otheri.e
reprod"ced itho"t the a"thor:. ritten permi..ion
S1GNE2% ''''''''''''''''''!
AUTHOR(S ADDRESS ;<&= NEW 5AFARA
5AFARA
-ARARE
DATE October )'$$
ii
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An empirical modelling of the Zimbabean e!port f"nction #$%&'()''&*+
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iii
DEDICATIONS
5o m0 late father9 re.t in e!ternal peace+
i8
ABSTRACT
5he re.earch pre.ent. the determinant. of the e!port f"nction of Zimbabe+ E8al"ating
the .ignificance of E!change rate.9 net foreign direct in8e.tment and gro.. dome.tic
prod"ct in determining the Zimbabean e!port.+ ,0 ".ing E8ie. to empiricall0
model the e!port f"nction the re.earcher a. able to deri8e the relation.hip beteen
e!port. the independent 8ariable.+ 3.ing the regre..ion re."lt. the re.earcher a.
able to determine that there i. a .ignificant relation.hip beteen e!port and
economic 8ariable.@ e!change rate and national income both ha8ing negati8e
relation.hip ith e!port f"nction hile foreign direct in8e.tment ha8ing a po.iti8e
impact on e!port f"nction+ -oe8er9 the re.earch co"ld not determine the
.ignificance of e!port re8en"e in determining e!port f"nction and the .ocio C
political determinant. of e!port f"nction ere e!cl"ded from the model9 b"t the.e
are i.."e. orth p"r."ing in in8e.tigating the determinant. of e!port f"nction+
5herefore9 the re."lt. are appropriate in effecti8e management of the econom0
beca".e if one cannot mea."re .tati.tical relation.hip. he?.he cannot manage the
econom0+
8
AC"NOWLEDGEMENTS
1t i. often .aid that Dno man i. an i.land "nto him.elf Dand hence thi. maEor "ndertaAing
and compilation of thi. proEect co"ld ha8e ne8er been a ."cce.. itho"t reference
to the orA9 contrib"tion9 enco"ragement and ."pport of man0 indi8id"al. and
organiFation. hich 1 hereb0 acAnoledge m0 indebtedne.. to them all+
5hi. di..ertation i. the re."lt of the combined effort of man0 patient and dedicated
people+ 1n that re.pect 1 ant to e!tend m0 .pecial thanA. to m0 academic
."per8i.or Mr+2enhere for hi. e!pert ."pport in all a.pect. of thi. di..ertation+ -i.
contrib"tion to thi. re.earch ent be0ond mere academic d"tie. to incl"de more
paternal or brotherl0 ."pport+ 1 am .incerel0 gratef"l to Mr+ 2enhere for all the
re.o"rce. both mental and otheri.e hich he contrib"ted to m0 re.earch+
A re.er8ed acAnoledgement goe. to m0 belo8ed parent. Mr.+Mangoro and the late Mr+
Mangoro for all the financial and moral ."pport a. ell a. their "na8ering ."pport
and "nd0ing lo8e+ 1 al.o ant to .peciall0 thanA m0 life partner ho ala0. p".he.
me to be the be.t in all that 1 do #God Ano. ho 1 met him*+ La.t b"t not lea.t 1
acAnoledge the contrib"tion of Mr+K"fa9Mr.+ Mat.he and Mr+ MandaFa of
5rinidad ind".trie.+ One a. the0 did not E".t imparted Anoledge b"t al.o ga8e me
the confidence to "ndertaAe thi. re.earch proEect+
8i
LIST OF TABLES
5able $G Regre..ion table
5able )G2ata collected for e!port. 9e!change rate 9gro.. dome.tic prod"ct and foreign
direct in8e.tment+

8ii
Table of Contents
RELEASE FORM.................................................................................................. i
APPROVAL FORM............................................................................................... ii
DEDICATIONS................................................................................................... iii
ABSTRACT........................................................................................................ iv
ACKNOWLEDGEMENTS...................................................................................... v
LIST OF TABLES................................................................................................ vi
CHAPTER I......................................................................................................... 1
INTRODUCTION................................................................................................. 1
1.0 Intro!"tion............................................................................................. 1
1.1 B#"$%ro!n o& 't!(................................................................................ )
1.) St#t*+*nt o& t,* -ro./*+.......................................................................0
1.1 P!r-o'* o& t,* 't!(................................................................................ 0
1.2 R*'*#r", 3!*'tion'................................................................................. 4
1.0 St#t*+*nt o& t,* H(-ot,*'i'...................................................................4
1.4 Si%ni5"#n"* o& 't!(............................................................................... 4
1.6 S"o-* o& 't!(......................................................................................... 6
1.7 D*/i+it#tion o& t,* 't!(......................................................................... 6
1.8 Li+it#tion'............................................................................................... 7
1.10 D*5nition o& t*r+'................................................................................. 7
1.11 S!++#r(............................................................................................... 8
CHAPTER TWO................................................................................................ 10
LITERATURE REVIEW....................................................................................... 10
).0 Intro!"tion........................................................................................... 10
).1 P!r-o'* o& Lit*r#t!r* r*vi*9..................................................................10
).) T,*or*ti"#/ Lit*r#t!r*............................................................................... 11
).).1 E:-ort *t*r+in#nt'........................................................................... 11
).).) T,* r*/#tion',i- .*t9**n *:",#n%* r#t* #n *:-ort'........................11
).).1 E:-ort; in<#tion #n *"ono+i" %ro9t,...............................................12
8iii
).).2 S-*"i#/i=#tion; *>"i*n"( #n *:-ort'................................................10
).).0 E:-ort' #n &or*i%n +#r$*t #""*''....................................................14
).1 E+-iri"#/ /it*r#t!r*................................................................................... 16
).1.1 E:",#n%* r#t* +i'#/i%n+*nt #n *"ono+i" %ro9t,...........................16
).1.) E:-ort; &or*i%n ir*"t inv*'t+*nt #n -ro!"tivit(............................17
).1.1 W,#t riv*' +#n!&#"t!rin% *:-ort' in A&ri"#?....................................18
).2 Kno9/*%* %#-......................................................................................... )0
).0 C,#-t*r '!++#r(..................................................................................... )0
CHAPTER 1...................................................................................................... )1
RESEARCH METHODOLOG@............................................................................. )1
1.0 Intro!"tion.............................................................................................. )1
1.1 R*'*#r", *'i%n....................................................................................... )1
1.) R*'*#r", in'tr!+*nt'............................................................................... ))
1.1 D#t# "o//*"tion #n -ro"*!r*'................................................................))
1.2 R*%r*''ion +o*/..................................................................................... )1
1.0 A!'ti5"#tion o& t,* Mo*/ #n V#ri#./*'....................................................)2
1B4 D!r.in W#t'on t*'t................................................................................... )0
1.6 E:-*"t* 'i%n'......................................................................................... )0
1.7 Si%ni5"#n"* o& t,* *rror t*r+...................................................................)4
1.8 Evi*9' 'o&t9#r*........................................................................................ )4
1.10 C,#-t*r S!++#r(.................................................................................. )4
CHAPTER FOUR............................................................................................... )6
DATA PRESENTATION; ANAL@SIS AND DISCUSSION.........................................)6
2.0 Intro!"tion.............................................................................................. )6
2B1 E:-*"t* 'i%n'......................................................................................... )6
2B) R*%r*''ion r*'!/t'.................................................................................... )7
2.1 Di#%no'ti" t*'t.......................................................................................... )7
2.2 D!r.inCW#t'on 't#ti'ti"'........................................................................... )8
2B0 V#ri#./* r*/#tion',i-'............................................................................... )8
2.4 S!++#r(.................................................................................................. 11
CHAPTER 0...................................................................................................... 1)
CONCLUSION AND POLIC@ RECOMMENDATIONS.............................................1)
0.0 Intro!"tion........................................................................................... 1)
i!
0.1 S!++#r( o& 5nin%'............................................................................. 1)
0.) Con"/!'ion............................................................................................. 11
0B1 Po/i"( R*"o++*n#tion'.......................................................................12
0B2 Ar*#' &or &!rt,*r 't!(......................................................................... 10
0B0 Con"/!'ion'........................................................................................... 10
REFRENCES..................................................................................................... 14
APPENDID....................................................................................................... 17
!
!i
CHAPTER I
INTRODUCTION
I506)14,08)5
5he c"rrent .t"d0 foc".e. on the role pla0ed b0 e!change rate.9 G2/9 and foreign direct
in8e.tment in the determination of the e!port in Zimbabe for the period $%&' to
)''&+ M"ltiple regre..ion model i. then ".ed to empiricall0 te.t the f"nction and
de8i.e the relation.hip beteen the dependent and independent 8ariable.+
1nternational trade i. idel0 acAnoledged a. an e..ential element in broadening the
pro.pect. for economic groth and de8elopment+ 5o thi. e!tend e!port. and
import. are component. of trade that had been de.cribed a. an engine for economic
e!pan.ion9 "ltimatel0 leading to greater le8el. of global o"tp"t+ 3ndo"btedl09 the
proce.. of global e!pan.ion criticall0 depend. on trade acti8itie.+ 5here i. need for
pro8i.ion of e!tra re.o"rce. to ."pplement economic groth and de8elopment9 th".
e!tra re.o"rce. cannot be .".tained o"t of dome.tic ."ppl0 alone9 impl0ing that
import. of foreign re.o"rce. are nece..ar0 to fill the gap beteen a groing
dome.tic demand and a limited ."ppl0+ 1mport. are therefore introd"ced a. a 8ital
component in international trade and economic de8elopment+
$
5he 8ital role(pla0ed b0 e!port. in foreign trade and economic de8elopment i. perhap.
hat generated the intere.t in e!plaining the determinant. of e!port f"nction in
Zimbabe+
1!1 B:,<=6)451 ); 90412
1n $%&'9 Zimbabe enEo0ed bri.A economic groth and the real gro.. dome.tic prod"ct
groth for $%&' to $%&$ e!ceeded )' percent+ 5he depre..ed foreign demand for
the co"ntr0:. mineral e!port. and on.et of the dro"ght c"t .harpl0 into the groth
rate+ 1n $%&)9 $%&H and $%&=9 then in $%&I the econom0 rebo"nded .trongl0 d"e to
a H'J E"mp in agric"lt"ral prod"ction+ -oe8er it .l"mped in $%&< to Fero groth
rate and e regi.tered a negati8e of abo"t min". H percent in$%&; primaril0
beca".e of dro"ght and foreign e!change cri.e. faced b0 the co"ntr0+ Zimbabe:.
G2/ gre on a8erage of abo"t =+I percent beteen $%&' and $%%'+

Zimbabe man"fact"ring e!port. ha8e been ."bEect to large polic0 change. #-an.
-ooge8een and 5aAaira M"m8"ma $%%%*+ 3nder 321 foreign e!change control.
and trade re.triction. created a large import ."b.tit"ting man"fact"ring .ector hile
e!port. ere re.tricted to tho.e fe co"ntrie. that defied the 3N .anction.+ After
independence mo.t control. ere Aept "ntil9 in $%%$9 the co"ntr0 embarAed "pon
trade and e!change rate liberaliFation+ 5he ea.ing of bia. again.t e!porting9 the
opening "p the co"ntr0 for import. and the realignment of the e!change rate a.
e!pected to lead to important change. in the a0 trade place in Zimbabe+
-oe8er9 trade liberaliFation a. partl0 re8er.ed in the late $%%'.+
)
5he E".tification for the trade and e!change rate liberaliFation reflect. the e!pected
efficienc0 gain. that follo from the impro8ed f"nctioning of marAet. and i. ba.ed
on traditional trade theor0+ 5raditional trade theor0 and it:. modern 8er.ion.
empha.iFe relati8e factor endoment.9 Ohlin #$%HH*9 on .Aill de8elopment9 learning
and technological competence and other a"thor. liAe N"rA.e #$%IH* re8ealed ."nA
co.t9 .cale economie. and agglomeration ad8antage. hile Kr"gman #$%%)*
empha.iFed tran.port co.t. and concentrating ad8antage. and ,rainnard #$%%H* a.
important .o"rce of and agent:. international competiti8e ad8antage+ good. that fell
"nder the open general import licence #OG1L*+
H
5he ERS arrangement pro8ed to be a 8er0 effecti8e trade liberaliFation polic0 in.tr"ment
G"nning9 #$%%<*+ 3nder ERS9 e!porter. here initiall0 alloed to retain I to ;+I
percent of their earned foreign e!change+ Later thi. a. increa.ed to )IJ9 I'Jand
$''Jin $%%)9 $%%Hand $%%= re.pecti8el0+ Starting in Kan"ar0 $%%) e!porter. ere
free to ".e to ".e their ERS allocation. to tho.e9 hich ere fo"nd on the negati8e
li.t+ 2"ring thi. period the Zimbabean dollar a. de8al"ed tice9 in No8ember
$%%$ b0 I<J and Kan"ar0 $%%H b0 )&J+
1ndi8id"al:. foreign c"rrenc0 acco"nt. ere denominated introd"ced in K"ne $%%H+on $
Kan"ar0 $%%=9foreign c"rrenc0 acco"nt. ere introd"ced and to Ctier or a d"al
e!change rate .0.tem a. introd"ced and OG1L9 ERS and E1S arrangement. ere
then aboli.hed+ E!porter. co"ld retain <'J of their earning. from e!port earning.
in their corporate F7A. or .ell it on the inter(banA marAet+ 5he0 ere reB"ired to
.ell the other ='J to the re.er8e banA of Zimbabe at an official e!change rate
Mlambo et al #$%%&*+ 5hi. implied that d"ring thi. period Zimbabe a.
effecti8el0 operating a d"al e!change rate .0.tem+ According to G"nning #$%%<* the
mandator0 .elling of ERS f"nd. con.tit"ted an implicit ta! to the e!porter .ince the
central banA acB"ired the.e f"nd. at the official e!change rate9 hich a. m"ch
loer than the going marAet rate+

5hi. ha. loered E!port performance9 hich i. Ae0 to the Zimbabe econom0+ 5hi. i.
beca".e trade i. a ."b.tantial .hare of the G2/ and e!port. are the main .o"rce of
foreign e!change for the econom0 +1n partic"lar agric"lt"ral e!port.9 hich
declined dramaticall0 in the recent 0ear.9 ha8e traditionall0 been an important
dri8er of economic groth in Zimbabean econom09 gi8en the .ector L. e!ten.ion
bacAard and forard linAage.+ -ence9 fo.tering competiti8ene.. i. important for
Zimbabe:. long(term groth and e!ternal 8iabilit0+
=
5he groth rate of total e!port. a. high in the .econd half of the $%%'.9 b"t then t"rned
negati8el0 .ince the earl0 of )'''.+ZimbabeL. e!port performance a. ell abo8e
the a8erage of African co"ntrie. in $%%'. and according to the 71A World fact booA
Zimbabe d"e to it:. comparati8e ad8antage in agric"lt"re hich a. dominated
large commercial farm.9 and man"fact"ring+
-oe8er folloing the increa.ing o8er8al"ation of the c"rrenc09 e!port performance
dropped off .ignificantl0 in )''$()''=9incl"ding relati8e to the a8erage of
de8eloping economie. and neighbo"ring nation. ith the official e!change rate9
fi!ed rate fi!ed from October )''' fir.t at ZMII(3SM$ and later at ZM&)=(3SM$
"ntil end )''H9the c"rrenc0 became increa.ingl0 o8er8al"ed9 and the monetar0
a"thoritie. re.ponded ith a .erie. of ad hoc mea."re.9 incl"ding9 the creation of
.pecial regime. for tobacco and gold e!porter.9 5he introd"ction of a managed
foreign e!change tender .0.tem earl0 )''= and grad"al rela!ation of official
e!change rate from ZM&)=(3SM$ to ZMI;''(3SM$ b0 end of )''=+-oe8er the
c"rrenc0 became o8er8al"ed again .ince the demand for foreign e!change
contin"ed to picA "p+ A. a con.eB"ence the parallel marAet premi"m ro.e from $H
percent in Kan"ar0 )''= to IH percent b0 end )''=+
1n conte!t9 Zimbabe i. .aid to ha8e initiated a fa.t tracA land reform program to
redi.trib"te land+ Abo"t %''' farm. ere li.ted for acB"i.ition b0 end )''=9b"t fe
farmer. ere compen.ated and man0 farm. remain "nallocated to ne .ettler.+ 5hi.
e!ec"tion of land reform a. accompanied b0 .ignificant lo..e. in prod"ction+
Agric"lt"ral o"tp"t declined b0 H' percent and thi. promoted import. to meet the
local demand+ 5hi. .it"ation of decline in national o"tp"t impo.e. donard
pre.."re on the commoditie. a8ailable for e!porting+
I
1!2 S0:0+-+50 ); 03+ .6)*/+-
5he rele8ant a"thoritie. tried to implement policie. that facilitate .tr"ct"ral change in the
econom0 and to correct imbalance. of the macro economic obEecti8e. in the co"ntr0+ 5he
effecti8ene.. of the.e policie. on the macro economic obEecti8e. i. perhap. marginal
E"dging from the per.i.tent problem. that the econom0 face. and ha. faced+ 5hi. ."gge.t.
that there ha. been an information gap ith re.pect to e8idence g"ided polic0 de.ign+
With the problem of an e!i.ting information gap in mind9 a .t"d0 of the e!port f"nction i.
orth p"r."ing con.idering that the Zimbabean econom0 i. fairl0 open and hea8il0
e!port dependent to generate foreign c"rrenc09 the demand for e!port. ha. .trong
implication. on o"r macroeconomic obEecti8e.+
5hi. .t"d0 therefore aim. at adeB"atel0 e!plain the maEor determinant of o"r e!port. the
period $%&' to )''&9 e!plicitl0 .hoing the role of e!change rate.9 foreign direct
in8e.tment9 national income9 ind".tr0 capacit0 "tili.ation in infl"encing e!port f"nction+
Empiricall0 modelling the e!port f"nction a. ell a. the a..ociated polic0 implication.
are important .tep. in pro8iding a fo"ndation of rational9 e8idence g"ided deci.ion
maAing9 partiall0 filling the information gap and aiding polic0 maAer. to e.timate the
re.pon.e of import demand to macroeconomic 8ariable .hocA.+
1!# P46.)9+ ); 03+ 90412
5o find o"t to the e!tent of foreign direct in8e.tment. infl"ence on
Zimbabean e!port.+
5o demon.trate the effect of e!change rate infl"ence on e!port. in Zimbabe+
<
5o find the e!tent for hich national income impacted on the Zimbabean
e!port f"nction+
1!> R+9+:6,3 &4+908)59
2oe. foreign direct in8e.tment ha. an0 role on the determination of the e!port.
f"nction of Zimbabe+
-o the e!change rate doe. affected e!port f"nction demand d"ring the period
$%&' to )''& in the co"ntr0N
2id national income infl"ence the e!port f"nction demand for Zimbabe d"ring
the period $%%= to )''&N
1!$ S0:0+-+50 ); 03+ H2.)03+989
5e.t the n"ll h0pothe.i. that e!change rate depreciation gi8e. ri.e to an
increa.ed e!port+
5e.t the n"ll h0pothe.i. that foreign direct in8e.tment enco"rage. increa.ed
e!port. in Zimbabe+
5e.t the n"ll h0pothe.i. that national income increa.e affect po.iti8el0 on the
e!port f"nction of Zimbabe d"ring the period $%&' to )''&+
1!? S8=58;8,:5,+ ); 90412
5hi. .t"d0 help. in polic0 implementation and form"lation beca".e thi. .t"d0 e!plain the
determinant. of e!port f"nction con.idering 8ital role of e!port a. a component of
foreign trade and de8elopment9 E!planation on e!port f"nction beha8io"r contrib"te to
empirical literat"re on Zimbabe+ 5hi. anal0.i. then help. in polic0 de.ign and
implementation b0 .taAeholder. and economic planner.+
;
Additionall0 gi8en that e!change rate9 foreign direct in8e.tment9 national income9
e!change rate and policie. linAed to the.e 8ariable. ere primaril0 p"r."ed to impro8e
the ,O/ po.ition9 th". e!port. fall ithin the e!port re8en"e b"ffer+ 5herefore the
effecti8ene.. of the.e policie. i. orth con.idering+ 5he polic0 implication. dran from
the .t"d0 are therefore .ignificant in term. of their contrib"tion to informal deci.ion(
maAing+
5he beha8io"r of e!port. i. an important a.pect in economic. beca".e it i. ".ed for
applied orA+ 5hi. mean. that it i. central to ba.ic ta.A. ."ch a. G2/ foreca.t. and the
impact of e!change rate 8ariation. on the c"rrent acco"nt+ 5he.e B"e.tion. ari.e dail0 in
the orA of central banA9 in8e.tment anal0.i. and m"ltilateral organi.ation. ."ch a. the
1MF+
1!@ S,).+ ); 90412
5he .t"d0 ill foc". on the Zimbabean e!port f"nction+ 1t ill be geographicall0
limited to Zimbabean econom0+ 5he re.earch ill be cond"cted d"ring the
re.earcher:. period of attachment+ 5he re.earcher ill maAe ".e of p"bli.hed
.tati.tic. and other appro8ed doc"ment. and the re.earch ha. been re.tricted to
period of tent0(eight 0ear. from $%&' to )''&+f"rthermore the re.earch ill "tiliFe
the econometric model. and doe. not ".e other re.earch method. liAe
B"e.tionnaire. and inter8ie.+
1!8 D+/8-80:08)5 ); 03+ 90412
5hi. part ill o"tline the core or central area of foc". of the re.earch+ 5he.e incl"de the
topic and the parameter. hich act a. g"ideline. to hat the re.earch act"all0 looAed at+
5he.e incl"deG
&
5he re.earcher:. foc". ill be on the Zimbabean e!port f"nction from 0ear $%&'
to )''& onl0 and thi. period a. and inflationar0 period and the re.earcher
decided to abandon other 0ear.+
Re.earch ill be limited to Zimbabean e!port f"nction onl0+
5he .t"d0 ill "tiliFe .econdar0 data onl0+
5he .t"d0 ill be done beteen Kan"ar0 $%&' and 2ecember )'$$+
1!9 L8-80:08)59
5he re.earch i. capital inten.i8e ."ch that other .o"rce. of data ill not be 8e.ted
d"e to .carcit0 of re.o"rce.+
5he re.earch can taAe long a. the a. data i. different depending on the .o"rce+
2"e to orA commitment. the re.earcher might not e!ha".t the librarie. de.pite
the internet and other internal .o"rce.+
1!10 D+;85808)5 ); 0+6-9
/olic0 A deliberate co"r.e of action "ndertaAen b0 manager. or national go8ernment to
infl"ence organiFational or national goal. #en+iAipedia+org*
E!port f"nction 1 . an idea ".ed in economic theorie. to mea."re e!port.+ 5he total
amo"nt of e!port. in a nation i. mainl0 affected b0 to 8ariable. the total foreign
ab.orption and the real e!change rate+#en+iAipedia+org*
Real e!change rate 1. the nominal e!change rate that taAe. the inflation differential.
among the co"ntrie. into acco"nt+ 1t. importance .tem. from the fact that it can be ".ed a.
an indicator of the competiti8ene.. in the foreign trade of a co"ntr0 #AnAra9 $%%;*+
E!change rate 8olatilit0 i. a mea."re of the fl"ct"ation. in an e!change rate +it can be
mea."red ho"rl09 dail0 or on ann"al ba.i. #ma!iFip+com*+ Al.o Ste8en
M+S"rano8ic#)'';* defined it a. the degree to hich e!change rate change o8er and ent
to empha.iFe that e cannot e!pect e!change rate 8olatilit0 hen "tiliFing a fi!ed
e!change rate beca".e it doe. not 8ar0
%
1nflation 1. the o8erall "pard price mo8ement of good. and .er8ice. in an econom0
often ca".ed b0 an increa.e the ."ppl0 of mone09 "."all0 mea."red b0 the con."mer price
inde! and the prod"cer price inde! #in8e.torord.+com
7omparati8e ad8antage 7o"ntrie. ha8e comparati8e ad8antage in tho.e good.9 hich
the0 can9 the reB"ired factor. of prod"ction are relati8el0 ab"ndant locall0+ 5hi. i.
beca".e profitabilit0 of good. i. determined b0 the inp"t. co.t.+ #En+iAipedia+org*
1!11 S4--:62
5hi. chapter looAed at hat moti8ated the re.earcher to carr0 o"t a .t"d0 on the
Zimbabean e!port f"nction+ 5he obEecti8e. and the B"e.tion. behind the problem
ere al.o highlighted incl"ding the importance of carr0ing thi. re.earch+
F"rthermore the chapter looAed at the h0pothe.i. ".ed to te.t the 8ariable.9
limitation. and delimitation. of the .t"d0+ 5he ne!t chapter i. a critical re8ie of
literat"re+
$'
CHAPTER TWO
LITERATURE REVIEW
2!0 I506)14,08)5
White #)''I9 I)* define. literat"re re8ie a. an acco"nt of hat ha. been p"bli.hed on a
topic b0 accredited re.earcher. or .cholar.+ 5hi. chapter re8ie. literat"re and other
finding. related to the e!port f"nction9 ith a ca.e of the Zimbabean econom0+
2!1 P46.)9+ ); L80+6:046+ 6+78+A
5he re8ie of literat"re accompli.he. .e8eral important thing.+ Sharp et al #)'')*
identifie. to rea.on. for literat"re re8ie+ 5he fir.t i. that the preliminar0 .earch help.
0o" to generate and refine 0o"r re.earch idea.+ Literat"re re8ie al.o enable. 0o" to
maAe a critical re8ie of the literat"re and identif0 gap. #Sa"nder. et al )''%*+ Literat"re
re8ie .hare. ith the reader the re."lt. of other .t"die. that are clo.el0 related to the
.t"d0 being reported #FraenAel O Wallen9 $%%'*+ 1t relate. the .t"d0 to the larger9 ongoing
dialog"e in the literat"re abo"t a topic9 filling in gap. and e!tending prior .t"die.
#Mar.hall O Ro..man9 $%&%*+ Sa"nder. et al #)'''* f"rther add. on that literat"re re8ie
pro8ide. a frameorA for e.tabli.hing the importance of the .t"d09 a. ell a. a benchmarA
for comparing the re."lt. of a .t"d0 ith other finding.+ 1t frame. the problem earlier
identified+
5he re8ie of literat"re pro8ide. the bacAgro"nd and conte!t for the re.earch problem+ 1t
.ho"ld e.tabli.h the need for the re.earch and indicate that the re.earcher i.
Anoledgeable abo"t the area "nder re.earch #Wireman9 $%%I9='<*+ ,".ha and -arter
#$%&'@ II* ob.er8e that literat"re re8ie identifie. gap. and potential pitfall. in
Anoledge and it help. a8oid "nnece..ar0 replication b0 .hoing hat ha. been
$$
pre8io".l0 co8ered+ 5he practicabilit0 and integrit0 of the re.earch i. al.o determined
hich pro8ide. a fo"ndation and E".tification for f"rther re.earch challenging the
re.earcher to thinA abo"t ho the orA e!tend.9 modifie. and ."pport. or e8en challenge.
that of other.+
Literat"re re8ie al.o .eeA. to pre.ent a ba.i. for a .t"d0 b0 pro8iding a theoretical and
concept"al ba.i. "pon hich the re.earch i. "ndertaAen+ 2oole0 #$%%I@)H* acAnoledge.
that re8ieing related literat"re i. of great importance a. it .er8e. in the enB"ir0 of
pre8io". orA that acB"aint. the re.earcher ith hat ha. been alread0 done in the field
thereb0 minimiFing the po..ibilit0 of "npremeditated d"plication+ F"rthermore9 the
re8ie can be highl0 beneficial to the re.earcher in the attainment of rele8ant theor0 and
pointing o"t to the .trategie.9 proced"re. and in.tr"ment. that ma0 be fr"itf"l in p"r."ing
the problem+
-oe8er9 White #)''IG<$* point. that .ome literat"re ma0 contain error.9 hich mean
that the re.earcher ma0 al.o ".e thi. erroneo". data that a"tomaticall0 affect. the re."lt.+
1n addition9 the literat"re ma0 be o"tdated and th". pro8e irrele8ant to the topic "nder
.t"d0+
2!2 T3+)6+08,:/ L80+6:046+
2!2!1 EB.)60 1+0+6-85:509
5he propo.ition of F21 led e!port. groth i. contro8er.ial in empirical literat"re+ ,"t the
role of dome.tic in8e.tment i. belie8ed to be m"ch important for e!port e!pan.ion
.trategie.+ 1n an0 ca.e9 the importance of F219 if an09 cannot dimini.h the role of
prod"cti8e in8e.tment from the dome.tic econom0+ While pri8ate dome.tic in8e.tment
can be regarded a. a permanent and reliable channel to enhance prod"ction capacit09
in8e.tment in p"blic .ector ha. been con.idered important9 for e!ample in road.9
$)
comm"nication and other p"blic good. and .er8ice. that are e..ential to .tim"late pri8ate
in8e.tment+ F"rthermore9 go8ernment ha. a deci.i8e role thro"gh ."pport for re.earch and
contract ith foreign b"0er. a. ell a. in facilitating acce.. to credit to both directl0 and
indirectl0 e!porting term.+ F"nAe and -oll0 #$%%)* arg"e that the maEorit0 of the pre8io".
approache. ha8e empha.iFed demand factor.+ S"ch model. ha8e generall0 been rather
"n."cce..f"l in e!plaining long r"n trend. in e!port performance+

5ogan #$%%H* find. that d"ring the $%&'. the le8el of the econom0(ide ."b.id0 rate. and
that of inter(ind".tr0 di.per.ion of incenti8e. ha. ."b.tantiall0 been loered+ 5he
.t"d0 al.o find. that the 5"rAi.h e!port( and import(competing ind".trie. ha8e
benefited from the e!port incenti8e. more than the other .ector.+

Al.o Riedel9 -all and Grae #$%&=* ".ed B"antitati8e method. of re.earch to identif0 the
determinant. of e!port performance in 1ndia on the ba.i. of time(.erie. anal0.i.
o8er the period $%<&($%;&+ 5he .t"d0 anal0.e. the effect. of relati8e price of
e!port.9 relati8e dome.tic demand and dome.tic profitabilit0 on e!port
performance+ 5he dependent 8ariable ".ed i. the ratio of inde!e. of con.tant price
e!port. to ind".trial prod"ction+ E!port. are e!pre..ed a. a ratio to o"tp"t in order
to acco"nt for the effect of e!pan.ion of prod"ction capacit0+ 5he re."lt. ."pport the
8ie that dome.tic marAet condition. .trongl0 infl"ence e!port beha8io"r+ 5he
8ariable mea."ring dome.tic profitabilit0 or relati8el0 dome.tic demand i. fo"nd to
be .tati.ticall0 .ignificant in e!plaining e!port beha8io"r in )H of H' .ector.+
Relati8e price9 incorporating e!port polic0 incenti8e. and the e!change rate t"rn o"t
to be .tati.ticall0 .ignificant in onl0 $' of the H' .ector.+ -oe8er9 relati8e price.
tended to be .ignificant in tho.e .ector. here comparati8e ad8antage i. pre."med
to be .tronge.t9 for e!ample9 read0(made garment.9 carpet ea8ing9 handicraft. and
metal prod"ct.+ 5he .t"d0 ha. the loophole of ".ing .hort period+ 1t reB"ire. a long
period for better e.timate.+
$H
A more recent .t"d0 of Sharma #)''$* in8e.tigate. e!port. determinant in 1ndia ".ing
ann"al data for $%;'(%&+ 5he .t"d0 ".e. .im"ltaneo". eB"ation frameorA+ 5he
re."lt. of .t"d0 ."gge.t that demand for 1ndian e!port. increa.e hen it. e!port
price fall. in relation to orld price.+ F"rthermore9 the real appreciation of the
r"pee ad8er.el0 affect. 1ndian e!port.+ E!port. ."ppl0 i. po.iti8el0 related to the
dome.tic relati8e price of e!port. and higher dome.tic demand red"ce. e!port
."ppl0+ Foreign in8e.tor. appear to ha8e .tati.ticall0 no .ignificant impact on e!port
performance9 altho"gh the coefficient
Of F21 ha. a po.iti8e .ign+ -oeAman and 2EanAo8 #$%%&* hich data are a8ailable9
/oland i. the onl0 one ith a .ignificant po.iti8e a..ociation beteen F21 and
e!port. .tr"ct"re+

2!2!2 T3+ 6+/:08)5938. *+0A++5 +B,3:5=+ 6:0+ :51 +B.)609
Since the breaAdon of the ,retton(Wood agreement9 the trading nation. ha8e embraced
a regime of floating e!change rate determination+ 5hi. i. .aid to ha8e bro"ght "p
the i.."e of e!change rate 8olatilit0 in general and it. impact on foreign trade in
partic"lar9 and it ha. been the ."bEect of n"mero". .t"die.+ 1n addition9 the
e!perience of c"rrenc0 cra.h in 5hailand and the A.ian financial cri.i. ha8e led to
e!plo.i8e re.earch on the ca".e. and impact. on temporal e!change rate 8olatilit0+
/re8io". literat"re .t"die. ha8e been inconcl".i8e@ mo.t hold the notion that
e!change rate "ncertaint0 ha. either po.iti8e or negati8e effect. on trade 8ol"me+

According to them9 trade co"ld be con.idered a. an option held b0 firm.9 and the 8al"e of
trade ri.e. ith 8olatilit0 #Serc" and 4anh"lle $%%)*+While FranAe #$%%$* de8elop. a
model in hich a firm e8al"ated the e!it co.t. a..ociated ith lea8ing a foreign marAet
again.t lo..e. created b0 e!port.9 and 8ice 8er.a+ 3nder a 8ariet0 of beha8io"ral
a.."mption.9 it a. po..ible that an0 gi8en firm o"ld9 on a8erage9 enter .ooner and e!it
later hen there i. a ri.e in e!change rate 8olatilit09 th". increa.ing the a8erage n"mber of
trading firm.+ 5hi. a. ."pported b0 1MF #$%&=*+ 1n line ith thi. finding9 4iaene and de
$=
4rie. #$%%)* ill".trate9 in the conte!t of theoretical model. or empirical model.9 that
e!change rate 8olatilit0 might benefit trade+

1n contra.t9 according to McKenFie #$%%%*9 mo.t of the pre8io". .t"die. appear to fa8o"r
the negati8e h0pothe.i.9 in that real e!change rate 8olatilit0 i. detrimental to e!port.+
1brahim #)''H* fo"nd that depreciation of dome.tic c"rrenc0 increa.e. the co.t. of
imported inp"t. and e8ent"all0 ind"ce. contractionar0 effect. on the econom0+ Some
theoretical .t"die. AriFe #$%%I* ha8e pro8ided e8idence to ."pport the h0pothe.i. that an
increa.e in e!change rate 8olatilit0 might ad8er.el0 affect trade@ .ince ri.A(a8er.e
e!porter. face greater ri.A and "ncertaint0 ith regard to profit earned9 the0 therefore
red"ce the ."ppl0 of traded good.+

A n"mber of empirical .t"die. ha8e fo"nd ca.e. here a ri.e in e!change rate 8olatilit0
ma0 ha8e both po.iti8e and negati8e implication. on e!port. and import.9 depending on
the prod"ct. and co"ntrie. 7ho" #)'''*9 for e!ample9 arg"ed that the 8ariabilit0 of an
e!change rate might either deter or .tim"late bilateral trade+ Sa"er and ,ohara #)''$* al.o
fo"nd that 8olatilit0 ha. .ignificant negati8e effect. on e!port. from the de8eloping
co"ntrie.9 e.peciall0 in Latin America and Africa9 b"t not on e!port. from the le..
de8eloping or ind".trialiFed co"ntrie. in A.ia+

5he.e concl".ion.9 hoe8er9 cannot be .een a. definiti8e+ 5here are al.o a fe .t"die.9
hich concl"de that e!change rate 8olatilit0 pla0ed no .ignificant role in e!plaining trade
8ol"me #Ari.totelo". )''$*+
2!2!# EB.)60C 85;/:08)5 :51 +,)5)-8, =6)A03!
1t need. to be empha.iFed at the o"t.et the o8er8al"ation of national c"rrencie. i. not the
.ole po..ible .o"rce of the h0pothe.iFed linA. beteen inflation9 e!port. and groth+
$I
-igh inflation ma0 al.o di.tort prod"ction b0 dri8ing a edge beteen the ret"rn. to real
and financial capital+ 1t ma09 moreo8er9 red"ce .a8ing and B"alit0 of in8e.tment b0
red"cing real intere.t rate9 often far belo Fero+ 5h".9 the net depreciation of capital .tocA
accelerate.+ F"rther9 high inflation ma0 be a .0mptom of economic mi.management for
e!ample per.i.tent go8ernment b"dget deficit.9 imperfect in.tit"tion. for e!ample fragile
banA. and financial marAet. and other factor. liAe political "phea8al and .ocial .trife that
together help "ndermine e!port performance and economic groth+
Rapid inflation can retard e!port. and groth one or all of the.e channel.9 #G0lfa.ion9
$%%&*+ E8en .o9 the e!perience of -ong Kong and Korea .ho. that moderate inflation
%percent and ;percent per ann"m on a8erage in $%&I($%%= doe. not precl"de 8igoro".
e!port. and rapid9 .".tainable economic groth+ 5he ca".ation ma0 r"n in both
direction.G for e!ample9 rapid groth ma0 contrib"te to price .tabilit0 b0 .trengthening
the ta! ba.e and th". dimini.hing the need for printing mone0 to finance go8ernment
b"dget deficit. and al.o b0 red"cing the ri.A that competing claim. for .hare. in the
national income b0 different .ocial gro"p. lead to price increa.e. and co.t inflation+
A high le8el of gro.. dome.tic prod"ct p".he. e!port 8ol"me "pard. indicate. #Og"ledo
and Mac/hee $%%=*+
2!2!> S.+,8:/8D:08)5C +;;8,8+5,2 :51 +B.)609
1n re.pon.e9 recent 0ear. ha8e itne..ed a rapidl0 groing empirical literat"re e!amining
the determinant. of e!porting9 and e.peciall0 the role of prod"cti8it09 at the firm le8el+
From a polic0 per.pecti8e9 thi. line of re.earch appear. to be highl0 rele8ant a. the to
theoretical frameorA. #trade theor0 and firm(le8el theor0* ha8e B"ite different
implication.+
1f there are ."b.tantial entr0 co.t.9 for in.tance9 policie.9 hich are ."cce..f"l in
facilitating eno"gh firm. to enter the foreign marAet9 ill ha8e effect. on e!port.
$<
e!tending o8er .e8eral time period.+ 9 Me!ico9 and Morocco9 and ,ig.ten et al for
7ameroon9 Ghana9 Ken0a and Zimbabe #)'''* 5here are to main rea.on. h0 thi.
might be .o+ Fir.tl09 efficient firm. ma0 .elect them.el8e. into the e!port marAet+
5hi. .eem. to be the ca.e in the 3S ,ernard and Ken.en #$%%%* and in mo.t .ector. in
7olombia9 Me!ico and Morocco 7leride. et al9 #$%%&* Secondl09 firm. ma0 become
efficient thro"gh e!porting9 the .o(called learning(0 e!porting effect+#Kraa0 $%%;* find.
.ome e8idence of thi. in 7hina ,ig.tenetl #)'''* find both effect. pre.ent for 7ameroon9
Ghana9 Ken0a and Zimbabe+ We attempt to determine hether man"fact"ring firm. in
So"th Africa are more efficient too+ We find that thi. i. indeed .o9 altho"gh it i. dependent
on here the0 e!port to+ 3nfort"natel09 beca".e e ha8e onl0 cro..(.ectional data e
cannot get an idea of hether thi. i. beca".e of .elf(.election9 learning(b0(e!porting or
both+ We al.o find9 in common ith ,ig.ten et al #$%%%*9 that 8er0 fe So"th African
firm. are .peciali.t e!porter.+
Altho"gh9 man0 firm. e!port C ;$J of o"r .ample C the.e firm. do not e!port 8er0 m"ch
C abo"t $&J of their o"tp"t+ Le.. than half the firm. in the .ample e!port more than $'J
of their .ale.9 and onl0 $'J of firm. e!port half or more than half of o"tp"t+ 1n light of
the pop"larit0 in the literat"re of ."nA co.t. a. an important factor the affecting the e!port
deci.ion thi. .eem. to be a p"FFle+

2!2!$ EB.)609 :51 ;)6+8=5 -:6<+0 :,,+99
Redding and 4enable. #)''=a* con.ider a prod"ction po..ibilit0 frontier beteen e!port.
and other good.+ 1n that conte!t the model predict. the negati8e relation.hip beteen
foreign marAet acce.. and the ."ppl0 capacit0+ -igh le8el. of foreign marAet acce.. are
e!pected to be a..ociated ith a le.. than proportional increa.e in e!port. and a loer
le8el of ."ppl0 capacit0+ An e!pan.ion of the e!port .ector increa.e. the co.t of factor. b0
increa.ing demand pre.."re and th". lead. to higher prod"cer price.9 hich are
$;
negati8el0 related to ."ppl0 capacit0+ -oe8er9 the .ign of the relation.hip co"ld be
arg"able+ ,etter foreign marAet acce.. co"ld al.o dra prod"ction re.o"rce. from abroad
8ia foreign direct in8e.tment or labo"r migration+
1n that ca.e9 factor demand pre.."re co"ld be ea.ed and the .ign of the relation.hip co"ld
become "ncertain at lea.t to a certain e!tent Empiricall09 if the fir.t effect #factor price.*
dominate. the .econd #factor. ."ppl0* an e.timate of the ela.ticit0 of e!port performance
ith re.pect to foreign marAet acce..9 hich i. le.. than one o"ld be obtained+ 1n other
ord.9 e!port performance o"ld be e!pected to gro le.. than proportionall0 than
foreign marAet acce..+ On the contrar09 if the ela.ticit0 of e!port performance ith
re.pect to foreign marAet acce.. i. greater than one9 then e!port. o"ld groth
proportionall0 more than foreign marAet acce..+
2!# E-.868,:/ /80+6:046+

2!#!1 EB,3:5=+ 6:0+ -89:/8=5-+50 :51 +,)5)-8, =6)A03
Real e!change rate mi.alignment i. negati8el0 related to economic groth9 #Edard.
$%&&*+1n partic"lar9 Gh"ra and Grenne. #$%%H* fo"nd that different mea."re. of real
e!change rate mi.alignment and it. in.tabilit0 ha8e negati8e effect. on the groth rate of
real per capita income9 e!port9 and agric"lt"ral o"tp"t a. ell a. on in8e.tment for .ample
of HH ."b(Saharan African co"ntrie. incl"ding Zimbabe+ Mi.alignment e!change rate
mean. loer profitabilit0 in the .ector. ho.e o"tp"t price. are loered relati8e to price.
in other .ector.+ 4er0 often9 mi.alignment taAe. the form of dome.tic c"rrenc0
o8er8al"ation9 hich h"rt. tradable acti8itie.+ 5hi. affect. groth performance ad8er.el0
.ince prod"cti8it0 impro8ement. tend to be concentrated in e!port. or import(competing
ind".trie.+ Moreo8er9 di.torted e!change rate ha8e negati8e indirect effect. "."all0
referred to a. .m"ggling acti8itie. that ca".e the ."ppl0 of good. to legal or official
marAet. to fall+
$&
5he increa.ing incidence of ethnic conflict. and m"ch(p"bliciFed con.eB"ence. of the.e
conflict. ha8e led economi.t to maAe a connection beteen ethnic di8er.it0 and economic
phenomena liAe groth and in8e.tment9 Ea.ter0 and Le8ine #$%%;* fo"nd empirical
e8idence to ."pport their claim that high le8el of ethnic di8er.it0 of co"ntrie. in Africa i.
an important contrib"tor to their poor economic performance +La/orta et al#$%%%* pointed
o"t that ethnic di8er.it0 lead. to corr"ption and lo efficienc0 in go8ernment. that
e!propriate from di.ad8antage
5he diagram of the international monetar0 f"nd #)''=* belo ill".trate. the ann"al
a8erage rate of e!port. groth from $%%I to )''= of the different ."b(Saharan co"ntrie.9
hich incl"de Zimbabe9 Ken0a9 3ganda9 So"th Africa and 5anFania+ 1t .ho. that
Zimbabe e!perienced a negati8e e!port groth from )''$ to )''=+
2!#!2 EB.)60C ;)6+8=5 186+,0 857+90-+50 :51 .6)14,087802
5hi. empirical literat"re in.pired a n"mber of theoretical paper. that drop the a.."mption
of a repre.entati8e firm and in8e.tigate the beha8io"r of heterogeneo". firm. in general
eB"ilibri"m model. of open economie.+ 5he.e theoretical model. in t"rn generate te.table
h0pothe.i.9 and .er8e a. a catal0.t for a ne generation of micro econometric .t"die. of
international acti8itie. of firm.+ A ca.e in point i. the m"lti(co"ntr09 m"lti(.ector general
eB"ilibri"m model of -elpman9 MelitF and 6eaple #)''=* #henceforth9 -M6* that
e!plain. the deci.ion of heterogeneo". firm. to .er8e foreign marAet. either tro"gh
e!port. or foreign direct in8e.tment #F21*+5he0 .ho that9 in eB"ilibri"m9 onl0 the more
prod"cti8e firm. choo.e to .er8e the foreign marAet.9 and the mo.t prod"cti8e among thi.
gro"p ill f"rther choo.e to .er8e the.e marAet. 8ia F21+
5he.e empirical paper. taAe the -M6(model a. a point of depart"re+ -ead and
Rie.#)''H*".e data for Kapane.e firm. @the0 find that firm. that onl0 .er8e the dome.tic
marAet tend to be .maller than firm. that onl0 e!port and firm. that do F21 +1n8e.tor.
$%
ho al.o e!port are generall0 larger than e!porter. ho do not ha8e o8er.ea. in8e.tment+
/rod"ction f"nction re.id"al. 0ield m"ch eaAer


2!#!# W3:0 1687+9 -:54;:,04685= +B.)609 85 A;68,:E
1t ha. been ."gge.ted that ."b(Saharan Africa ill not be a .ignificant e!porter of
man"fact"red good. beca".e it lacA. the nece..ar0 .Aill.+ Wood $%%= arg"e that Africa
can onl0 e!port "n.Ailled labo"r inten.i8e man"fact"re.9 a. "n.Ailled labo"r i. relati8el0
ab"ndant+ El.ehere it ha. been arg"ed that nat"ral re.o"rce inten.i8e good. ill
dominate African e!port.9 and that man"fact"ring e!port. therefore ill be marginal9
e8en in the labo"r inten.i8e .ector. #Wood and Ma0er $%%&*+ 1n contra.t to thi. line of
tho"ght9 hich i. ba.ed on comparati8e ad8antage theor09 i. the 8ie that firm(le8el
factor. are more important determinant. of e!port. than factor. related to ind".tr0
#Kr"gman $%&%*+ 1n partic"lar9 empha.iFing that entr0 into e!porting i. a..ociated ith
.ignificant fi!ed co.t.9 thi. theor0 predict. that onl0 relati8el0 prod"cti8e firm. ith
relati8el0 high ret"rn. to e!porting ill choo.e to inc"r the co.t. and enter the
international marAet+
1n re.pon.e9 recent 0ear. ha8e itne..ed a rapidl0 groing empirical literat"re e!amining
the determinant. of e!porting9 and e.peciall0 the role of prod"cti8it09 at the firm le8el+
From a polic0 per.pecti8e9 thi. line of re.earch appear. to be highl0 rele8ant a. the to
theoretical frameorA. #trade theor0 and firm(le8el theor0* ha8e B"ite different
implication.+ 1f there are ."b.tantial entr0 co.t.9 for in.tance9 policie.9 hich are
."cce..f"l in facilitating eno"gh firm. to enter the foreign marAet9 ill ha8e effect. on
e!port. e!tending o8er .e8eral time period. 2"e to a .hortage of micro data9 there i. not
m"ch empirical e8idence on the c"rrent topic for Africa+
)'
2!> "5)A/+1=+ =:.
5he ab.ence of a re.earch on the impact of e!change rate 8olatilit0 on the Zimbabean
e!port. and the debate. on ho the to 8ariable. affect each other ha. moti8ated the
re.earcher to "ndertaAe thi. re.earch+
2!$ C3:.0+6 94--:62
5hi. chapter re8ie literat"re gap on the e!port f"nction and other 8ario". determinant.
of e!port. and their applicabilit0 to the Zimbabean ca.e+ 5he maEor i.."e. di.c"..ed are
the effect. of e!change rate mi.alignment and the impact of e!change rate 8olatilit0 on
the e!port f"nction+ 5he ne!t chapter i. re.earch methodolog0
)$
CHAPTER #
RESEARCH METHODOLOGY
I506)14,08)5
1n thi. chapter9 the re.earcher gi8e. a de.cription of ho the re.earch a. carried o"t in
order to meet obEecti8e. of the .t"d0 that i. to model the Zimbabean e!port
f"nction+5he re.earch attempt. to e.tabli.h the relation.hip beteen e!change rate.9
foreign direct in8e.tment9 gro.. dome.tic prod"ct and e!port. in Zimbabe+ Re.earch
de.ign i. the plan of the .t"d0 that pro8ide. the general plan of ho to go abo"t
an.ering re.earch B"e.tion.+
))
#!1 R+9+:6,3 1+98=5
According to ,r0man #)''H*9 a re.earch de.ign pro8ide. a frameorA for collection and
anal0.i. of data+ Leed0 #$%%=* al.o propo"nd. that a re.earch de.ign i. all the
proced"re. .elected b0 the re.earcher to an.er a partic"lar .et of B"e.tion. of the
h0pothe.i.+ KanAomicF #$%%I* define. a re.earch de.ign a. a .0.tematic and orderl0
approach taAen toard. the collection of data .o that information can be obtained
from tho.e data+ 5he main obEecti8e of the re.earch de.ign i. to pro8ide re."lt.9
hich are E"dged to credible and .ho"ld re.emble realit0 and are taAen to be tr"e
and rea.onable+ 5he re.earch de.ign to be ".ed i. the correlation re.earch de.ign+
Water. #$%%;* define. correlation re.earch de.ign a. a method of .t"d0 in hich
to or more B"antitati8e 8ariable. from the .ame gro"p of ."bEect. in hich one i.
tr0ing to determine if there i. a relation.hip or co(8ariation beteen the to
8ariable.+ 1t attempt. to e!plore relation.hip. to maAe prediction.+ 1t e!plore. and
te.t relation beteen 8ariable.9 r"le. o"t alternati8e 8ariable. that co"ld pla0 a role
in relation. beteen 8ariable. #,r"ce $%%=*+ 5he de.ign ha. an ad8antage of being
reliable altho"gh maEor critici.m ha. been fo"nd on it. fail"re to bring o"t the
ca".alit0 effect #7re.ell )''H*+ 7orrelation re.earch de.ign i. appropriate to thi.
.t"d0 .ince there i. need to find the nat"re of relation.hip9 regre..ion and co(
8ariation beteen e!port. and e!change rate 8olatilit0+
#!2 R+9+:6,3 859064-+509
Walliman #)'''* define. re.earch in.tr"ment. a. tool. ".ed for collecting information and
data need to find .ol"tion. to a problem "nder in8e.tigation+ 5he re.earcher
hoe8er ".ed de.A re.earch+ 2e.A re.earch in8ol8e. gathering data that alread0
e!i.t. either from internal .o"rce. of the client9 p"blication. of go8ernmental and
non(go8ernmental in.tit"tion. and in profe..ional ne.paper.+
#!# D:0: ,)//+,08)5 :51 .6),+146+9
)H
5here are ba.icall0 to t0pe. of data that ma0 be ".ed in empirical anal0.i.9 namel09
primar0 data and .econdar0 data+ /rimar0 data or field re.earch in8ol8e. original
data gathering on the targeted 8ariable+ 5he re.earcher hoe8er did not ".e primar0
data beca".e the data reB"ired i. diffic"lt to con.olidate b0 indi8id"al.+
According to ZiAm"d #$%%$*9 .econdar0 data i. hi.torical9 alread0 a..embled and do not
reB"ire acce.. to re.pondent.+ 5hi. form of data compri.e. of information that ha.
been collected for other p"rpo.e. and not the re.earch "nder re8ie+ For the
p"rpo.e of thi. re.earch .econdar0 data a. gathered from 8ario". .o"rce. ."ch a.
te!tbooA.9 Eo"rnal. and Z1MS5A5+ According to Gha"ri and Gronha"gh #)'')*9 it i.
le.. e!pen.i8e to ".e .econdar0 data to collect data+ 1t enable. the re.earcher to
.pend more time and effort anal0Fing and interpreting data+ Secondar0 data can be
collected B"icAl0 Ne"man #)'')*+ Secondar0 data pro8ide. a .o"rce of data that i.
permanent and a8ailable in the form that ma0 be checAed relati8el0 ea.0 b0 other.
2e".combe #$%%&*+
#!> R+=6+998)5 -)1+/
)=
5hi. paper ."gge.t. that in modelling the e!port f"nction M"ltiple Regre..ion Model i.
preferable th". de8i.e relation.hip beteen .e8eral independent 8ariable. and a
dependent ? criterion 8ariable+ Regre..ion anal0.i. refer. to the techniB"e. for the
modelling and anal0.i. of n"merical data con.i.ting of 8al"e. of a dependent
8ariable #e!port f"nction* and one or more independent 8ariable. #gro.. dome.tic
prod"ct9 foreign direct in8e.tment. and e!change rate*+
X P Q' R Q$ER R Q)G2/ R QHF21 R S
WhereG
X P total amo"nt of good. and .er8ice. e!ported9
Q' P con.tant term or the intercept9
Q$ P partial regre..ion coefficient. for #
I 9+++9 $ = i
*9
ER P real e!change rate
G2/ P gro.. dome.tic prod"ct
F21 P foreign direct in8e.tment
S P random error term+

Regre..ion i. appropriate to m0 .t"d0 a. it i. ".ed for h0pothe.i. te.ting and modelling of
ca."al relation.hip.+ A d"mm0 8ariable ha. been incl"ded in the model to capt"re the
effect of e!port control policie.9 e!port reg"lation policie. coerce. a certain trend of
e!port demand re."lting in the decline in the e!port demand or an e!port liberaliFation
polic0 hich ea.0 o"t acce.. to e!port thereb0 re."lting in a larger aggregate import
demand in the econom0+ 5h". o"r linear model ill be a. follo.
)I
5he portion Q' R Q$ER R Q)G2/ R QHF21 called the determini.tic portion hile the S i.
called the .tocha.tic portion of the model+ 5he random error term i. incl"ded in the
model to repre.ent 8ariation. in the dependent 8ariable not e!plained b0 the
independent 8ariable. being ".ed in the model+ 5hi. i. rational .ince there are a
n"mber of factor. that ha8e been left o"t+
'9 $9 )9 H the.e are partial regre..ion co(efficient. hich e!plain. the rate of change of
the dependent 8ariable hen independent 8ariable change. b0 $''J+
#!$ F4908;8,:08)5 ); 03+ M)1+/ :51 V:68:*/+9

4ariable. ".ed in thi. re.earch are con.idered d"e to their 8olatilit0 d"ring the )&0ear.+
5he.e 8ariable. ere the mo.t acti8e d"ring o"r econom0:. melt don+ 4ariable.
incl"ded in the model are B"antified on 0earl0 ba.i.+
EB,3:5=+ 6:0+9 C A fall in the relati8e dome.tic price. d"e to e!change rate depreciation
maAe. e!port. cheaper in international marAet. re."lting in increa.ed demand for e!port.9
therefore e e!pect the po.iti8e impact of real e!change rate on e!port groth+ E!change
rate being the determinant of import price. ha. a role to pla0 on international trade+
2"ring the period "nder re8ie e!change rate. fl"ct"ated in accordance ith economic
decline in the co"ntr0 therefore it. fl"ct"ation. impacted .omeho on international trade+
7on.ideration of thi. 8ariable enable. to te.t the act"al effect of e!change rate on e!port
f"nction+
)<
N:08)5:/ 85,)-+ C Groth of the G2/ i. an indicator of f"t"re potential and
.".tainabilit0 of prod"ction le8el+ Groth i. more 8alid determinant of e!port.
a. compare to G2/ beca".e it mea."re. the .".tainabilit0 of o"tp"t le8el.+ So e
e!pect po.iti8e impact of G2/ groth on e!port. e!pan.ion+ + 5herefore
fl"ct"ation. in national income d"ring the period had .ome impact on e!port
f"nction a. there i. a po.iti8e relation.hip of income and import. th". the
relation.hip ha8e to be te.ted+
F)6+8=5 186+,0 857+90-+50 C1n empirical literat"re the role of F21 in e!port. promotion
i. contro8er.ial+ Man0 .t"die. for e!ample /fafferma0r #$%%<* find po.iti8e
effect of F21 on e!port.+ 5he main rea.on "nderl0ing i. the e!port oriented
MN7.+ Since go8ernment pro8ide. facilitie. for e!port promotion9 ."ch facilitie.
al.o attract foreign in8e.tor.+ 1n order to promote e!port. go8ernment can adopt
F21(led e!port groth .trategie. ith tin obEecti8e. of capt"ring the benefit. of
both F21 inflo and e!port. groth+ On the other hand9 man0 .t"die. find
in.ignificant or eaA impact of F21 on e!port. T.ee -oeAman and 2EanAo8
#$%%;*+ S"ch .t"die. point o"t that the role of F21 in e!port promotion in
de8eloping co"ntrie. remain. contro8er.ial and depend. cr"ciall0 on the moti8e
for ."ch in8e.tment+ 1t ma0 not contrib"te to e!port groth+ On the other hand9 if
the moti8e i. top tap e!port. marAet. b0 taAing ad8antage of the co"ntr0:.
comparati8e ad8antage9 then F21 ma0 contrib"te. to e!port groth+
#%? D46*85 W:09)5 0+90
5hi. te.t i. ".ed to find o"t if to or more time .erie. data are co integrated+ 5hi. ."gge.t.
that to or more time .erie. ma0 ha8e a relation.hip+ 2W te.t for a"tocorrelation
.o a. to a.certain that the error term i. not correlated+ Whene8er there i.
a"tocorrelation the p 8al"e. tend to be different from Fero .hoing dependenc0
beteen the error term and it. lagged 8al"e.+ 1f the 2W te.t fig"re i. greater than
the F(.tati.tic therefore error term. are correlated+
);
#!@ EB.+,0+1 98=59
Alloing all the.e 8ariable. to interact ith e!change rate ill re8eal more information
of ho e!change rate interact. ith other facet. of the econom0+ 5hat i. the
relation.hip re8ealed b0 the literat"re i. e!pected to be re."lt. of thi. re.earch+ 5he0
are al.o room for different re."lt. d"e to different economic c0cle.9 policie. and
other factor.+
#!8 S8=58;8,:5,+ ); 03+ +66)6 0+6-
5he error term repre.ent. the magnit"de of other factor. than e!change rate9 gro..
dome.tic prod"ct and net foreign dome.tic prod"ct that infl"ence the dependant
8ariable+ 5he .ignificance of the.e factor. ma0be to .mall that .tati.tical
repre.entati8e ma0 be challenging ."ch that data on the.e 8ariable. ill be diffic"lt
to B"antif0 ."ch that their infl"ence cannot be .tati.ticall0 determined+
#!9 E78+A9 9);0A:6+
E4ie. pro8ide. a broad introd"ction to B"antitati8e economic method.9 for
e!ample ho model. ari.e9 their "nderl0ing a.."mption. and ho e.timate. of
parameter. or other economic B"antitie. are comp"ted+ 5o model the .tati.tic. l
ill ".e E8ie. .oftare9 E4ie. #Econometric 4ie.* i. a .tati.tical pacAage
for Windo.9 ".ed mainl0 for time(.erie. oriented econometric anal0.i.+
#!10 C3:.0+6 S4--:62
)&
5hi. chapter elaborated the re.earch methodolog0 and re.earch de.ign+ Stati.tical te.t. to
be ".ed al.o o"tlined in thi. chapter9 E".tification of the model and 8ariable. a.
al.o o"tlined in thi. chapter+ 5he ne!t chapter9 finding. ill be pre.ented and
anal0.i. and interpretation of the re."lt. i. done in the ne!t chapter
CHAPTER FOUR
DATA PRESENTATIONC ANALYSIS AND DISCUSSION
)%
>!0 I506)14,08)5
1n thi. chapter data finding. are pre.ented9 anal0.ed and interpreted a. the0 relate to
theor0 that "nderlie. the .t"d0+ Finding. ere anal0Fed to come "p ith rea.onable
concl".ion of the Zimbabean e!port f"nction+

>%1 EB.+,0+1 98=59
According to the theoretical the e!change rate9 real gro.. dome.tic prod"ct and net
foreign direct in8e.tment are .aid to be po.iti8el0 related to the e!port.+ An e!change rate
appreciation ill lead to an increa.e in e!port. +hile and increa.e in gro.. dome.tic
prod"ct ill p".h "p the ."rpl". a8ailable for e!port. and an increa.e in F21 ill increa.e
o"r o"tp"t a8ailable for e!port.+
>%2 R+=6+998)5 6+94/09
T:*/+ 1
E P Q R Q$ER R Q)G2/ R QHF21
E P '+)=)%HI R Q$<+$=E('< R Q)('+'')I;; R QH'+=H&&'HH
Se P '+'$))<= $+H=E('< '+&%HH'' '+'''<'=
t(.tati.tic P $%+&'&;% =+I;)'II '+=%'HI= (=+)<&I<&
/rob P '+'''' '+'''$ '+<)&) '+''')
R
)
P '+I;;)<=
2"rbin Wat.on P '+%I)I;I
F(Stati.tic P '+''''<&
H'
>!# D8:=5)908, 0+90
2iagno.tic te.t e!amine. the correlation9 normalit0 and f"nctional a.pect of the data and
it i. carried o"t in thi. .t"d0 and the model a. correctl0 fitted .ince it a. clo.er to
$+from the e.timated model 9R
)
P'+I;;)<=9thi. mean. that abo"t I&J of the e!port.
are e!ogeno".l0 e!plained and =)J i. e!plained o"t.ide the model+ On the other
hand the adE".ted R
)
of '+I)<IH< .ho. that the model e!plain. abo"t IHJ of the
8ariation of e!port f"nction taAing into acco"nt the degree. of freedom and the
remaining =;J i. e!plained o"t.ide the model the remaining =;J al.o .ho. the
.ignificance of the error term+
>!> D46*85-W:09)5 90:08908,9
2"rbin(Wat.on .tati.tic te.t 8al"e of '+%I)I;H re8eal. that the 8al"e. of the 8ariable. do
not ."ffer a"tocorrelation .ince it i. not clo.er to to+ 5hi. 8al"e of 2"rbin(Wat.on
indicate. that the model doe. ."ffer .erial correlation+ 5hi. i. beca".e the 8al"e i.
not clo.er to to+
>%$ V:68:*/+ 6+/:08)5938.9
2W te.t for a"tocorrelation .o a. to a.certain that the error term i. not correlated+
Whene8er there i. a"tocorrelation9 the p 8al"e. tend to be different from Fero .hoing
dependenc0 beteen the error term and it. lagged 8al"e.+ 1f the 2W te.t fig"re i. greater
than the F(.tati.tic9 therefore error term. are correlated+ 1n addition9 an F Stati.tic of
'+''''<& .ho. that the model i. properl0 .pecified .ince the F Stati.tic i. .ignificant at
$J le8el of .ignificance+
T3+ 6+/:08)5938. *+0A++5 FDI :51 03+ Z8-*:*A+:5 +B.)60 7)/4-+ 14685= 03+
.+68)1 1980 0) 2008!
From the literat"re there i. a po.iti8e relation.hip beteen e!port. and the net foreign
direct in8e.tment9 a one "nit change in the F21 ill tran.late to a '+=H&'HH increa.e in
e!port.+ 5he fact that the co efficient i. not .o .ignificant mean. that an increa.e in net
F21 increa.e. the 8ol"me of e!port.+ With the relation.hip po.t"lated the ca.e to
Zimbabe e.peciall0 to the 0ear. "nder con.ideration9 Zimbabe ha. e!perienced .teep
increa.e. in F21 0et in the c"rrent acco"nt ha. impro8ed+ 5he re."lt. of a probabilit0 of
H$
'+<)&) ha8e .hon that foreign direct in8e.tment i. not 8er0 .ignificant hen modelling
the Zimbabean e!port f"nction+ 5hi. i. in line ith the finding. of Sharma #)''$*9he
re8ealed that F21 appear to ha8e no .tati.tical impact on e!port performance altho"gh the
coefficient of F21 had a po.iti8e .ign9 the .ame ith -oeAman and 2EanAo8#$%%&* ho
fo"nd a fo"nd a po.iti8e a..ociation beteen F21 and e!port+ 5heir in.ignificance might
be d"e to the fact that the0 are 8er0 little+
T3+ 6+/:08)5938. *+0A++5 +B,3:5=+ 6:0+ :51 03+ Z8-*:*A+:5 +B.)60 7)/4-+ 14685=
03+ .+68)1 1980 0) 2008E
5here i. a po.iti8e relation.hip beteen the e!port. and the e!change rate+ 1f the
e!change rate appreciate.9 it increa.e. the 8ol"me of e!port.+ A one "nit change in the
e!change rate ill re."lt in a'+<$= increa.e in e!port.+ -oe8er it ha. to be noted that the
e!change rate coefficient offer. .ome ".ef"l le..on.@ it mean. that the trade balance doe.
impro8e in re.pon.e to e!change rate appreciation+
5he probabilit0 of '+'''$ ha. .hon that e!change rate i. .ignificant hen modelling the
Zimbabean e!port f"nction+ For in.tance in the pa.t 0ear. the Zimbabean dollar a.
indeed o8er8al"ed again.t maEor c"rrencie. hence that on it. on ga8e an "nreali.tic
.it"ation hich .it"ation became .ignificantl0 different hen effort. ere made to rectif0
the .it"ation+ When the Zimbabean dollar a. ob8io".l0 o8er8al"ed a large n"mber of
tran.action. on foreign c"rrenc0 ere done in the illegal parallel marAet9 emergenc0 of
parallel marAet. i. indicati8e to control.+ 5he in.ignificant of e!change rate. coefficient
mean. that an0 de8al"ation or depreciation ill ha8e an .ignificant impact on
e!port.+ArinFe #$%%I* pro8ided e8idence to ."pport h0pothe.i. that an increa.e in
e!change rate might ad8er.el0 affect trade9 b"t m0 re."lt. do not compl0 ith the
theoretical literat"re a8ailable and thi. might ha8e been d"e to "nreliable data prod"ced
d"ring the h0perinflationar0 en8ironment ere the re.pon.ible office. a. not ell
financed to gather correct data+
R+/:08)5938. *+0A++5 GDP :51 +B.)60 7)/4-+!
H)
Real national income folloed a donard trend d"ring the period "nder re8ie9 a "nit
change in the real gro.. dome.tic prod"ct ill re."lt in C'+'')I;; decrea.e in e!port.+
5hi. i. not in line ith the theoretical literat"re hich empha.iFed on po.iti8e
relation.hip beteen e!port. and gro.. dome.tic prod"ct+ 5hi. i. the oppo.ite the re."lt.
of Og"ledo and Mac/hee#$%%=* ho re8ealed a po.iti8e relation.hip beteen e!port. and
gro.. dome.tic prod"ct+ 5he difference. might ha8e been ca".ed b0 the "nreliable data
that a. being prod"ced to p"blic b0 the re.pon.ible office. d"ring the h0perinflationar0
en8ironment in order to create a good image for the co"ntr0 to the donor.+
>!? S4--:62

From the re."lt. obtained9 foreign direct in8e.tment and e!change rate ha8e a po.iti8e
relation.hip ith the dependant 8ariable hich i. the e!port. hile the gro..
dome.tic prod"ct ha8e a po.iti8e relation.hip ith the e!port. +the probabilitie.
re8ealed that foreign direct in8e.t i. not 8er0 .ignificant in thi. model+
HH
CHAPTER $
CONCLUSION AND POLICY RECOMMENDATIONS
$!0 I506)14,08)5
5he main thr".t of the .t"d0 a. to tr0 and e.tabli.h the main ca".e. of the folloed
trend of import demand in Zimbabe ith the obEecti8e of finding o"t the
relation.hip of economic 8ariable. inflation9 RG2/9 e!change rate9 inflation and
commodit0 .hortage in e!plaining import demand+ 5hi. chapter therefore
foc".e. on polic0 recommendation. ba.ed on the re."lt. di.c"..ed in the
pre8io". chapter+ 1t di.c".e. .ome polic0 option. that can be p"r."ed
co"ntr0ide and orld o8er+
$!1 S4--:62 ); ;85185=9

According to the empirical and theoretical finding. from the pre8io". re.earch9 foreign
direct in8e.tment9 real gro.. dome.tic prod"ct and e!change rate are po.iti8el0 related to
H=
the national e!port.+ 5hi. re.earch a. ba.ed on the ho e!change rate9 real gro..
dome.tic prod"ct and foreign direct in8e.tment affect the Zimbabean e!port f"nction+
5hi. re.earch proEect ha. re8ealed that the national income i. negati8el0 related to the
Zimbabean e!port f"nction9 hile both the foreign direct in8e.tment and the e!change
rate are po.iti8el0 related to the Zimbabean e!port f"nction and thi. i. in line ith the
theoretical bacAgro"nd+ 5he re."lt. of thi. re.earch re8ealed that F21 and e!change rate
are po.iti8el0 affecting the Zimbabean e!port f"nction+
5he re."lt. from the data anal0.i. of thi. re.earch proEect ha. al.o re8ealed that thi.
model i. properl0 .pecified 9thi. i. .hon b0 the F Stati.tic of '+''''<& hich i.
.ignificant at one percent le8el of .ignificant+ Moreo8er a one "nit change in foreign
direct in8e.tment ill tran.late to a '+=H&'HH increa.e in e!port.9 a "nit change in
e!change rate ill re."lt in a '+<$= increa.e in e!port. and a "nit change in gro..
dome.tic prod"ct ill re."lt in a '+'')I;; decrea.e in the Zimbabean e!port.+ S"ch that
the final eB"ation become. EP'+'$))<=RQ$<+$=E('<RQ)('+'))I;;RQH'+=H&'HH
F"rthermore9 e!change rate9 foreign direct in8e.tment and gro.. dome.tic prod"ct ha8e
managed to e!plain '+I;;)<= of the Zimbabean e!port f"nction hile '+=));H< i.
e!plained o"t.ide the model+ 5hi. i. .hon b0 an R
)
of '+I;;)<= hich i. abo8e '+I+al.o
the data doe. not ."ffer from a"to correlation9 thi. i. re8ealed b0 the 2W te.t hich i. of
'+%I)I;) hich i. belo to+
According to the probabilitie. the gro.. dome.tic prod"ct and e!change rate ha8e pro8ed
to be .trong determinant. of the Zimbabean e!port f"nction hile foreign directl0 ha.
pro8ed to be le.. effecti8e in determining the Zimbabean e!port f"nction+ 5hi. i. .hon
b0 the probabilitie. of '+''')9 '+'''$ and '+<)&) re.pecti8el0 re8ealed b0 the regre..ion
re."lt.+
$!2 C)5,/498)5
HI
5hi. re.earch pre.ented an empirical anal0.i. of the Zimbabean e!port f"nction from
$%&' to )''&+to .it"ate thi. .t"d0 ithin the conte!t of the e!i.ting one. and again.t the
bacAgro"nd of the main obEect of thi. paper9 a detailed re8ie of theoretical and empirical
literat"re a. carried o"t+ 5he data "tili.ed prod"ced the re."lt. that ha8e been pre.ented
and anal0.ed and recommendation ere al.o made+
5he data .eem to be prod"cing re."lt. that are different from the theoretical bacAgro"nd9
the po.iti8e relation.hip beteen e!change rate and e!port. doe. not compl0 ith the
theoretical literat"re9 and "nreliable data might ha8e been the ca".e and 1 recommend the
re.pon.ible a"thorit0 to f"ll0 f"nd the office. the cond"ct re.earche. for them to acB"ire
the correct data+
On the other hand foreign direct in8e.tment re."lt. do compl0 ith the theor09 b"t F21 i.
not hea8il0 .ignificant to thi. model+ 5he re.earch ."gge.t that more m".t be done
impro8e F21 in order to increa.e o"r e!port ca.h inflo+
$%# P)/8,2 R+,)--+51:08)59
Economic acti8it0 in Zimbabe ill remain ."ppre..ed "p to ."ch a time that
there i. eno"gh .pace for the a"thoritie. to de.ign and implement policie. that are
de.irable ith long(term benefit.+
5here i. need in other ord. to looA at the po..ibilit0 of re engaging the 1MF
hich .ho"ld in one a0 or the other re."lt in "nlocAing other international
financier. ho regard the 1MF a. a .tandard bearer in international finance+
5he fact that the co"ntr0 i. not in a po.ition to boo.t it. prod"ction capacit0 th".
.ho"ld engage the World ,anA for finance to boo.t it. prod"ction capacit0+
1n8e.tor confidence .ho"ld be re.tored .o a. to attract in8e.tment and enco"rage
.a8ing. to boo.t prod"ction and gro.. dome.tic prod"ct+
Zimbabe embarAed on the E".tified land reform program9 thi. .a the co"ntr0
facing ac"te .hortage of food9 therefore the co"ntr0 .ho"ld engage in loan
.cheme. for farmer. accompanied ith collateral a. prereB"i.ite to get a loan .o
H<
that beneficiarie. ".e acB"ired f"nd. for intended ".e9 thi. help. to c"rb farmer.
from the immoral ".age of farming f"nd. and eB"ipment+
At the moment9 d"e to the declining balance of pa0ment ."pport there i. limited
latit"de that can be e!ci.ed b0 the rele8ant a"thoritie. to normaliFe the .it"ation+
1n partic"lar9 there i. limited .pace for fi.cal9 monetar0 and e!change rate policie.+
$%> A6+:9 ;)6 ;4603+6 90412
For f"rther .t"die. the re.earcher ."gge.t. that there i. need to incorporate more
8ariable. in the e!port. f"nction model+ 5he.e 8ariable. incl"de technolog09
international relation. and gro.. dome.tic prod"ct of the trading partner +5hi. o"ld
increa.e the credibilit0 of the model .ince the.e al.o affect the e!port f"nction in
de8eloping co"ntrie.+ Other f"nctional form. of the model ha8e to be te.ted al.o
a..e.. the .ignificance of the determinant. of the e!port f"nction in de8eloping
co"ntrie.+
5he re.earcher al.o ."gge.t. the application of the model in different period. of fi!ed
and fle!ible e!change rate .o a. to effecti8el0 a..e.. the effect of the e!change rate on
e!port f"nction+
$%$ C)5,/498)59
Relation.hip of e!port f"nction and economic 8ariable.9 hich are the e!change rate@
foreign direct in8e.tment and gro.. dome.tic prod"ct9 the relation.hip9 had been
theoreticall0 and empirical e!plored+ 1t i. from the empirical te.t carried o"t that there i.
.ignificant relation.hip beteen e!port. and the afore.aid economic 8ariable. for the
period $%&' to )''&+ -oe8er9 e!port f"nction determinant. cannot be re.tricted .ince
.ocial and political factor. ha8e .ignificant impact on e!port f"nction
H;
REFRENCES
Albeit MoAocheAana #)''&*@Z8-*:*A+G9 B/:,< -:6<+0 ;)6 ;)6+8=5 +B,3:5=+@ 3ni8er.it0 of
/retoria@ 2epartment of Economic.@ So"th Africa+
,r0man9 A+ and ,ell9 E+9 #)''<*9 B4985+99 R+9+:6,3 M+03)199 O!ford 3ni8er.it0 /re..9 O!ford
7entral Stati.tic. Office#)''&*@N:08)5:/ 85,)-+ :51 +B.+518046+ =6)A03@Go8ernment
printing office
2a8i. R9R 5or8iA9#$%%=*@5he Macroenomic. of Zimbabe in the $%&'@A G7E model anal0.i.9
Eo"rnal of African Economic. H
Ea.terb0(Smith et al #)''&*9 M:5:=+-+50 R+9+:6,3% A5 I506)14,08)59 I
th
Edition9 London9 Sage
Gha"ri / and Gronhang K9 #)''I*9 R+9+:6,3 M+03)19 85 B4985+99 S0418+9% A P6:,08,:/ G481+9
third Edition9 /rentice -all+
-"..e0 and -"..e09 #$%%;*9 B4985+99 R+9+:6,3C A .6:,08,:/ G481+ ;)6 451+6=6:14:0+ :51
P)90=6:14:0+ 9041+509C McMillan /re..+
H&
KancAoic.9 A+29 #)''I*9 UB4985+99 R+9+:6,3 P6)H+,09(9 =
th
Edition9 5homp.on Learning9 London+
Monetar0 polic0 re8ie .tatement for the fo"rth B"arter of )''I@ Re.er8e ,anA of Zimbabe #R,Z*9
)= Kan"ar0 )''<+
/a"l R Kr"gman and Richard ,aldin #$%&<*@ per.i.tent 5rade effect. of large e!change rate .hocA.@
National ,"rea" of economic re.earch+
Rob.on 79 #)'')*9 R+:/ W)6/1 R+9+:6,3C A 6+9)46,+ ;)6 S),8:/ S,8+508909 :51 P6:,0808)5+6
6+9+:6,3+69 )
nd
Edition9 O!ford9 ,lacAell+
4an 2alen #$%;&*9 U51+690:5185= E14,:08)5:/ R+9+:6,3C A5 I506)14,08)59 McGra -ill9 Ne 6orA+
Wegner #$%%H*9 A../8+1 B4985+99 S0:08908,9 M+03)19 :51 A../8,:08)599 7reda /re..9 So"th Africa+
Richard G Lip.e0@A5 8506)14,0)62 0) .)98087+ E,)5)-8,9 I
th
Edition@-erper and Ro
$%;&@England
Sa"nder. M9 et al9 #)''%*9 R+9+:6,3 M+03)19 ;)6 B4985+99 S041+5099 I
th
Edition9 1ndia9
/ear.on Ed"cation limited+
5odaro9M+O #$%;%*@E,)5)-8, 1+7+/).-+50+.i!th edition Ne 6orAG Longman
William - Greene #$%%;*@E,)5)-+068, A5:/2989 H

rd Edition@/rentice -all@London
6in9 R +K9 #$%%'*9 C:9+ S0412 R+9+:6,3% D+98=5 :51 M+03)199 Sage /"blication.9
Neb"r0 /arA9 7A+
H%
APPENDIX
T:*/+ 2


X

ER

GDP FDI CPI xg erg fdig
gdpgrt
h
198
0 1876
0.410
4 7841 8.04 6
0.))14
78
6.01008EC
00
0.0010
46
0.)120
78
198
1 1871
0.616
) 7864 0.4 12
0.))08
))
6.880)EC
00
0.0004
)2
0.1200
21
198
1401
0.841
2 7604 7.8 10
0.1776
70
0.000108
688
0.0010
14
C
).2008
7
198
! 1402
1.122
) 7041 2.0 18
0.1811
06
0.000111
4)1
0.0000
)4
C
).)02)
198
" 1671
1.00)
2 7411 1.0 10
0.)040
71
0.000162
06
0.0001
62
0.6821
12
198
# 1681
1.421
) 74)0 C).44 10
0.)064
0)
0.000180
)72
C
0.0001
1
C
0.0480
)
198
$ 1726
1.467
1 7477 C0.4 10
0.)1)0
8)
0.000181
101
C
0.0004
2
0.6102
10
198
% 1701
1.441
1 76)1
C
10.4
4 10
0.)1)2
64
0.000180
601
C
0.001)
)
0.1687
12
198
8 1670
1.82)
8 7700
C
1).4
1 7
0.)011
1
0.000)18
016
C
0.0012
1
1.2681
77
198
9 1608
).)60
1 7727 C11 12
0.1877
0)
0.000)04
044
C
0.0012
6
C
0.0))4
199
0
1601 ).414
2
7672 C1) 16 0.1880
46
0.000100
116
C
0.0011
C
0.6)11
='
6 1
199
1 1670
1.60)
) 7411 1 27
0.)06)
81
0.000210
620
0.0001
27
C
1.8482
8
199
1010
0.11)
1 4622 10 20
0.))47
47
0.000607
0))
0.00))
)2
C
)1.471
4
199
! 1082 4.810 4224 1) )0
0.)26)
70
0.001060
741
0.0028
42
C
2.2176
2
199
" 16)8
7.176
1 4717 10 )0
0.)0)7
0)
0.001))4
021
0.0021
76
4.071)
81
199
# ))16
8.110
8 6101 87 )7
0.1088
2
0.001101
467
0.0116
01
2.4044
1
199
$ )216
10.71
78 7604 10 14
0.)664
)0
0.001)22
88)
0.0020
)
)1.611
16
199
% )21)
17.40
71 7804 106 )0
0.)610
0
0.00)066
6)2
0.0118
26
).7610
71
199
8 1601
16.14
8) 4)62 214 27
0.)612
17
0.000804
)
0.0482
81
C
)8.824
2
199
9 1802
17.11
77 0842 00 04.))
0.118)
28
0.004182
714
0.0071
72
C
2.8210
1
00
0 1811 22 0761
10.4
4 00.))
0.1)06
)7
0.006281
81)
0.00)4
44
C
1.0)07
)
00
1 )171 00 4100 0.)8 11).1
0.1060
64
0.008008
008
2.60EC
00
1.800)
71
00
1676 00 4600
)).4
1
187.8
7
0.)440
17
0.007)0)
712
0.0011
60
8.7)70
1
00
! 1400 427 4)02 1.0)
087.6
0
0.)424
11
0.101411
476
0.0000
41
C
4.6)41
)
00
" 1440 011) 2278
7.48
4
11).6
0
0.1608
06
1.121)18
0)8
0.0018
16
C
)7.))1
8
00
# 1071 17684 )817
101.
40
070.7
0
0.02)2
80
4.221187
)17
0.0127
14
C
12.884
6
00
$ 16)1 07020 4420 20
1)71.
11
0.)078
8)
7.610118
)0)
0.0040
)
1)6.6)
20
00
% 1718 8461 2000
40.7
24
44)1)
.1
0.2026
0 ).21660
0.0142
4)
C
18.702
2
00
8 1411 10000 2214 01.4
10077
8
0.140)
41
4.681267
)41
0.0114
70 10.2
=$
APPENDIX 1
2ependent 4ariableG XG
MethodG Lea.t SB"are.
2ateG $'?'&?$$ 5imeG '=G$&
SampleG $%&' )''&
1ncl"ded ob.er8ation.G )%
4ariable 7oefficien
t
Std+ Error t(Stati.tic /rob+
7 '+)=)%HI '+'$))<= $%+&'&;% '+''''
ER <+$=E('< $+H=E('< =+I;)'II '+'''$
F21G '+=H&'HH '+&%HH'' '+=%'HI= '+<)&)
G2/GR5- ('+'')I;; '+'''<'= (=+)<&I<& '+''')
R(.B"ared '+I;;)<= Mean dependent 8ar '+);'&H&
AdE".ted R(.B"ared '+I)<IH< S+2+ dependent 8ar '+'&H<$&
S+E+ of regre..ion '+'I;IH; AAaiAe info criterion (
)+;=IH=%
S"m .B"ared re.id '+'&);<) ScharF criterion (
)+II<;I<
Log liAelihood =H+&';I< F(.tati.tic $$+H;%I=
2"rbin(Wat.on .tat '+%I)I;H /rob#F(.tati.tic* '+''''<&
=)
=H
==
=I
=<
2ependent 4ariableG XG
MethodG Lea.t SB"are.
2ateG $'?'&?$$ 5imeG '=G$&
SampleG $%&' )''&
1ncl"ded ob.er8ation.G )%
4ariable 7oefficien
t
Std+ Error t(Stati.tic /rob+
7 '+)=)%HI '+'$))<= $%+&'&;% '+''''
ER <+$=E('< $+H=E('< =+I;)'II '+'''$
F21G '+=H&'HH '+&%HH'' '+=%'HI= '+<)&)
G2/GR5- ('+'')I;; '+'''<'= (=+)<&I<& '+''')
=;
R(.B"ared '+I;;)<= Mean dependent 8ar '+);'&H&
AdE".ted R(.B"ared '+I)<IH< S+2+ dependent 8ar '+'&H<$&
S+E+ of regre..ion '+'I;IH; AAaiAe info criterion (
)+;=IH=%
S"m .B"ared re.id '+'&);<) ScharF criterion (
)+II<;I<
Log liAelihood =H+&';I< F(.tati.tic $$+H;%I=
2"rbin(Wat.on .tat '+%I)I;H /rob#F(.tati.tic* '+''''<&
=&