ISSN 2039-2117 (online) ISSN 2039-9340 (print) Mediterranean Journal of Social Sciences MCSER Publishing, Rome-Italy Vol 5 No 20 September 2014 621 Relationship between International Trade and Economic Growth: A Cointegration Analysis for Zimbabwe Gwaindepi Caleb University of Limpopo, P Bag X1106, Sovenga, 0727, South Africa Email: gwaindepi@gmail.com Musara Mazanai Monash South Africa (A Campus of Monash University, Australia), 144 Peter Road, Ruimsig, 1724 Email: jilgram@yahoo.com Dhoro Netsai L Great Zimbabwe University, P O Box 1235, Masvingo, Zimbabwe Email: nldhoro@gmail.com Doi:10.5901/mjss.2014.v5n20p621 Abstract The relationship between trade and economic growth has continued to dominate the debate in trade and development economics. Generally, countries which trade more have been seen to have a high growth path, some of which has been attributed to trade. However, it is very difficult to attribute much of the growth to trade and trade openness. The focus of this research paper is therefore to investigate if there exists a long run relationship between various trade and other macroeconomic variables for Zimbabwe for the period 1975 to 2005. The study employs the cointegration approach to establish the existence of a long run relationship between economic growth and trade variables. The results of the study indicate that trade and economic growth are cointegrated, but the relationship is strengthened by the stability of the macroeconomic policy since negative macroeconomic drivers such as rising inflation can constrain economic growth. Openness to trade is also deemed to play a crucial role, where reduction and elimination of barriers to trade promote growth in trade and ultimately economic growth. Keywords: trade variables, cointegration, economic growth 1. Introduction and Background From Adam Smith’s discussion of specialisation to the debates about import substitution versus export led growth, economists who investigated determinants of standards of living have also been interested in the effects of trade on economic growth and development (Aradhyula, Rahman and Seenivasan, 2007). Chen (2009) posits that the relationship between trade and economic growth has occupied the development debate for a protracted period. However despite the effort, there is little evidence to link the effects of trade on income growth. The vigour and growing interest in development economics debates related to the relationship between trade and growth reflect the importance and elusiveness placed upon settling the contentious issues both from a theoretical perspective and an empirical perspective. Contentions surrounding these debates relate to whether trade and trade policies play a causal role or they act as a facilitator of other underlying factors affecting growth (Chen, 2009). These contentions are a result of the fact that the ceteris paribus effect of trade on economic growth is difficult to estimate since examining the correlation between the two cannot identify the direction of causality (Ghartey, 1993; Shan and Sun, 1998). Trade may affect incomes through specialisation because of a comparative advantage, exploitation of returns from economies of scale, information exchange arising from improved communication channels and travel and technological spillovers through investments and exposure to new goods and services, new methods of productions and new ways of organisation. Although theoretically the connection between trade and growth has been established in economic literature (Lee & Huang, 2012; Chatterji, Mohan & Dastidar, 2013; Steiner, Wörz, & Slacík, 2014), empirically, the association between them has proven difficult to establish. This paper, hence seeks to establish the long run empirical relationship between