Effect of Exchange Rate and Trade Balance in Tanzania Economy for the Period of 1970-2014

The study focuses on the analysis the relationship between exchange rate change and Trade balances in Tanzania for the period 1970-2014, specifically this study focus on the main effects of Trade deficit in Tanzania by analyzing the effect of Real exchange rate (RER), Tanzania Gross domestic income (TGDP), Real world income (WGDP), Consumer price index (CPI), Trade balance (TB) etc. In this study The Regression method under the STATA version 09 software has been used for the econometric analysis with a sample period spanning from 1970-2014. The literature reviews of the previous researchers have the mixed results on the factors in questions. However this study tried to use more variables that have rarely been explored specifically in Tanzania and found out that the main influencing factors for the case of Tanzania are Real exchange rate (RER), Tanzania Gross domestic income (TGDP), Real world income (WGDP), Consumer Price Index (CPI), Trade balance (TB) so suggested policy measures should focus on them to reduce the trade deficit in the Tanzanian econom