Determinants of Export Demand Function for Malawi Tobacco

Abstract

This paper examines the export demand function of Malawi tobacco using panel data from 1997 to 2019. It estimates the relationship of tobacco quantity exported with Malawi’s export price, competitor’s export price, Gross Domestic Product (GDP), Real effective exchange rate (REER) as well as the impact of the World Health Organization’s (WHO) Framework Convention on Tobacco Control (FCTC). A double log fixed effects model with driscoll- kraay standard errors as well as fixed effects model with Least Square Dummy Variables (LSDV) model was used for empirical estimation. The empirical results confirmed that there exists a significant relationship among Malawi tobacco export demand, trade partner’s real income and export price. Furthermore, REER was elastic, while own price and cross price elasticities were less than zero. The results indicated that Malawi should take advantage of the high incomes of the tobacco importing countries to enhance international market share.