Tanzanian Cashew Nut Supply Response Under Market Reforms

Abstract

The title of this project is Tanzanian cashew nut supply response under market reforms. The main objective was to assess supply responses by the Tanzanian cashew nut industry under market reforms. The analysis employed secondary time series data from 1991-2012 using the ARDL bounds test approach. The results have revealed that in the short run; a 1 percent increase in price leads to 1.42 percentage increase in the quantity of cashews supplied. In addition, a 1 percent increase in rainfall results to a 0.81 percentage increase in cashew supply. Apart from that, a 1 percent increase in price of maize results to a 0.69 percent decrease in the cashew supply. On top of that, a 1 percent raise in the rate of inflation forces cashews supply to increase by 0.23 percent. Lastly, a 1 percent increase in exchange rate leads to almost 3 percent reduction of cashews supplied. These results imply that Tanzanian cashew nut supply is elastic in the short run to both price and non-price factors as well. However, the study failed to estimate long run elasticities due to lack of evidence to support the presence of co-integration. Basing on the study results, the policy recommendations includes; for the sector to bare fruitful results, both price and non-price incentives should be a priority. Also, the BoT should avoid delays on exercising control on exchange rate volatility in such a way that, critical and necessary continuous intervention in the exchange rate markets must be a priority.