What Drives Import Flows, Do Import Standards And Verification For Conformity Matter? A Panel Gravity Model for Kenya
This study sought to determine the factors that drive import flows into Kenya. It also investigated the effect of imports standards requirements and verification procedures on imports flows. Specifically, the aim was to determine whether import standards are trade catalysts or technical trade barriers. The study used a panel gravity model consisting of 14 countries where Kenya sources 80% of its imports for the period spanning 2012 to 2016 on quarterly basis. Dummy variables were used to capture verification procedures implemented on December 2015, regional integration and sharing of borders. Data was obtained from IMF. Firstly import standards are a technical trade barrier probably due to lengthy procedures involved in obtaining certificate of conformity. Secondly import flows in Kenya significantly depend on Kenyan economic performance (GDP), GDP of exporting economies and sharing of borders. A 1% increases in Kenya GDP increases the value of imports by almost 0.17% to 0.39%. In addition, East Africa Community has created a trade diversion other than the expected trade creation effect.