The Impact of Foreign Trade on Malawi Economic Growth

Abstract: The study was conducted with the aim of assessing the impact of foreign trade on economic growth in Malawi from 1961 to 2016. The study has used a neoclassic economic growth model with gross domestic product, exports, imports, capital and labor force as variables of analysis. Using annual time series data on the variables for the period 1961 to 2016 from the World Bank Data Bank, Ordinary Least Squares regression and statistical accuracy of the findings was done at 5 percent level of significance. The four variables which included exports, imports, gross capital formation and labor force were found to have a positive effect on the country’s economic growth. Nevertheless, the study found an existing relationship between the variables. The above results strongly suggest that Malawi should continue with its foreign trade. The study recommends export diversification, investment in technology, increase capital good through imports and labor intensive industrialization.