The Impact of Tariffs on Economic Growth in Angola: Evidence from Domestic Investment (2002-2023)

Abstract

This research focuses on the intersection of macroeconomics and international trade, particularly within the context of protectionism. The analysis covers the period from 2002 to 2023 and adopts a correlational design to explore the association between tariffs and economic growth, in terms of domestic investment. The theoretical association between these variables can be explained through the Classical Perspectives of International Trade, Endogenous Growth Theory, and Infant Industry Argument. The empirical literature reviewed revealed that there is a gap in the literature in terms of empirical studies on the impact of tariffs on economic growth in Angola, with a particular focus on domestic investment. The present research fills this gap employing Vector Error Correction Model (VECM) analysis. The data were sourced from national and international institutions such as The National Bank of Angola (BNA), The World Bank, and The International Monetary Fund (IMF), thereby eliminated the need for traditional sampling techniques. The combined pre- and post-estimation tests revealed that the data are non-stationary at level but become stationary after first differencing. The results show a significant short-run negative effect (β = -1.45, p = 0.00) in contrast, there is a strong positive long-run effect (β = 2.04, p = 0.00). Diagnostic tests confirm model stability, no autocorrelation (p > 0.24), presence of homoskedasticity (p = 0.25), and normality (p = 0.86), supporting its robustness for policy analysis. Consequently, the findings derived from this model provide a credible basis for policy recommendations. In summary, the results obtained revealed that tariffs in the short run had served to protect local industries in Angola, however their immediate effects deterred domestic investment. In the long run, tariffs emerge as a crucial determinant of domestic investment in Angola, exerting a significant and positive influence. These findings contribute to the broader discourse on the role of tariff policies in developing economies, in general, and Angola in particular, as it presents both short- and long-term challenges and opportunities. This duality underlines the importance for policymakers to adopt a balanced, context-specific approach to tariff policy—one that maximizes long-term benefits without jeopardizing short-term economic stability. Additionally, microeconomic studies are crucial to gain a deeper understanding of the effects of tariff imposition. To comprehensively analyse the microeconomic impact of tariffs or protectionism in Angola, further research should explore how tariffs influence investment in specific sectors.