Export-led growth and terms of trade volatility in the East African Community trade bloc

The export-led growth hypothesis is examined for five East African Community trade bloc countries using panel co-integration methods. Results indicate that exports have a positive and significant effect on exports-adjusted GDP in the long- and short-run horizons. In addition, an increase in terms of trade volatility has a negative and significant impact on GDP. The bulk of exports are primary commodities which are vulnerable to high terms of trade volatility. This increases the probability of reversing the gains from export-led growth. These countries should emphasize policies that lead to an increase in the share of value-added commodities in total exports.