Impact of Monetary Policy on Economic Growth in Tanzania from 1995 to 2020.

Semkiwa, Ekaudi Frank (2023) Impact of Monetary Policy on Economic Growth in Tanzania from 1995 to 2020. Masters thesis, The Open University of Tanzania.

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Abstract

This study has analyzed the impact of monetary policy on economic growth in Tanzania by using time series data for the period from 1995 to 2020. The data were collected from Bank of Tanzania. The study applied Augmented Dickey Fuller test stationary of variables. Additionally, Engel and Granger Test and Error Correction Model applied to test existence of long run and short run relationship between the variables. The study findings indicated that money supply and interest rate have long run impact on economic growth. However, the impact of inflation and exchange was found to be not statistically significant. Thus, it may be concluded that the monetary policy variables (money supply and interest rate) are of great importance on stimulating the economic growth in Tanzania as compared with other variables. Therefore, the study recommends allowing money supply to steadily increase by keeping pace with the economic growth. Adam et al.2011 start with conventional demand for money function, income,interest rates, return on alternative assets (such as foreign currency holdings and offshore assets, expected inflation and expected depreciation.This can promote investments hence increase real GDP. Moreover, the study recommends more strong supervision of financial system including controlling interest rates as well as putting strong measures on lending and borrowing.

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