The Effects of Money Supply on Inflation in Tanzania

James Ezekiel Mbongo; Felician Mutasa; Robert Ebihart Msigwa

doi:doi:10.11648/j.eco.20140302.11

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The Effects of Money Supply on Inflation in Tanzania

James Ezekiel Mbongo, Felician Mutasa, Robert Ebihart Msigwa

Published in Economics (Volume 3, Issue 2)

Received: 11 May 2014 Accepted: 14 June 2014 Published: 30 June 2014

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Abstract

This paper examines the effects of money supply on inflation in Tanzania. This study uses secondary data extracted from two sources, namely; the National Bureau of Statistics (NBS) and Central Bank of Tanzania (BoT), where all variables employed in the analysis are extracted. The study applies OLS, VAR and ECM technique to examine the effect of selected variables on inflation in Tanzania. OLS and ECM results show that money supply and exchange rate have significant impact on inflation in the short and long run. Further, VAR findings indicate that the current inflation can be influenced by the past state inflation. Therefore, the government of Tanzania is recommended to impose tight monetary policies and expand the proportion of money in the economy from informal to formal transaction. The successful implementation of the suggested indicators to evaluate the inflation in the country will help to cure the instability of inflation, in turn will direct the economy of the country to preferable level.

Published in	Economics (Volume 3, Issue 2)
DOI	10.11648/j.eco.20140302.11
Page(s)	19-26
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2014. Published by Science Publishing Group

Keywords

Inflation, Money Supply, Exchange Rate, Tanzania

References

[1]	J. Aikaeli, “Money and inflation dynamics: a lag between change in money supply and the cor-responding inflation process in Tanzania”. Bank of Tanzania working paper,2007.
[2]	O. Akinboade, F, Siebrits, and E. Niedermeirer, “Determinants of Inflation in South Africa”. University of South Africa, 2004.
[3]	A. Almounsor, “Inflation dynamics in Yemen: an empirical analysis”. IMF working paper, 2010.
[4]	F. Alturki, and S.Vtyurina, “Inflation in Tajikistan: forecasting analysis and monetary policy challenges”. IMF working paper, 2010.
[5]	R. Blavy, “Inflation and monetary pass-through in Guinea”. IMF working paper, 2004.
[6]	J. Crowley, “Com-modity prices and inflation in the Middle East, North Africa and Central Asia”. IMF working paper, 2010.
[7]	D. Durevall and N. Ndung’u, “A dynamic model of inflation for Kenya, 1974-1996”. IMF working paper, 1999.
[8]	J.Gottschalk, K, Kalonji, and K. Miyajima, “Analyzing determi-nants of inflation when there are data limitation”: The case of Sierra Leone. IMF working paper, 2008.
[9]	M. Khan, and A.Schimmelpfennig “Inflation in Pakistan: money or wheat”. IMF Working paper, 2006.
[10]	D.Kwimbere, and W. Mbowe “Inflation process in Tanzania”. Bank of Tanzania working paper, 2004.
[11]	G. Mankiw, “Principales of Macroeconomics”. Fifth Edition. TSI Graphics Inc, 2008.
[12]	W. Mbowe, “Monetary policy implementation and its effect on inflation in Tanzania: an empirical investigation for the period 1995-2005”. PhD Thesis. University of Dar es Salaam, 2008.
[13]	K.Moriyama, “Investigating inflation dynamics in Sudan”. IMF working paper, 2000.
[14]	J.Mtui, “Exchange rate depreciation, money supply and inflation: the Tanzanian experience 1970-1994”. Masters Dissertation. University of Dar es Salaam, 1996.
[15]	N. Mwase, “An empirical investigation of the exchange rate pass-through to infla-tion in Tanzania, 1990-2005”. IMF working paper, 2006.
[16]	M.Ndanshau, “Budget deficit, money supply and inflation in Tanzania. a granger causality test, 1967-2010”. University of Dar es Salaam, 2011.
[17]	B. Ndulu B. “Government securities bidding go online”. Business standard, page 11, 4th-10th Septermber 2012.
[18]	P. Ottaru, “The dynamics of inflation in Tanzania: a multivariate time series analysis”. Masters Dissertation. University of Dar es Salaam, 2001.
[19]	L.Rutasitara “Exchange rate regimes and inflation in Tanzania”. African Economics Consortium, 2004, Paper 138.
[20]	U. R. Sumaila and A. S. Layrea, “Determinants of inflation in Tanzania”, WP 2001:12, 2001, http: /www.cmi.no/public/2001-12.PDF.

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James Ezekiel Mbongo, Felician Mutasa, Robert Ebihart Msigwa. (2014). The Effects of Money Supply on Inflation in Tanzania. Economics, 3(2), 19-26. https://doi.org/10.11648/j.eco.20140302.11

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ACS Style

James Ezekiel Mbongo; Felician Mutasa; Robert Ebihart Msigwa. The Effects of Money Supply on Inflation in Tanzania. Economics. 2014, 3(2), 19-26. doi: 10.11648/j.eco.20140302.11

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AMA Style

James Ezekiel Mbongo, Felician Mutasa, Robert Ebihart Msigwa. The Effects of Money Supply on Inflation in Tanzania. Economics. 2014;3(2):19-26. doi: 10.11648/j.eco.20140302.11

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@article{10.11648/j.eco.20140302.11,
  author = {James Ezekiel Mbongo and Felician Mutasa and Robert Ebihart Msigwa},
  title = {The Effects of Money Supply on Inflation in Tanzania},
  journal = {Economics},
  volume = {3},
  number = {2},
  pages = {19-26},
  doi = {10.11648/j.eco.20140302.11},
  url = {https://doi.org/10.11648/j.eco.20140302.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.eco.20140302.11},
  abstract = {This paper examines the effects of money supply on inflation in Tanzania. This study uses secondary data extracted from two sources, namely; the National Bureau of Statistics (NBS) and Central Bank of Tanzania (BoT), where all variables employed in the analysis are extracted. The study applies OLS, VAR and ECM technique to examine the effect of selected variables on inflation in Tanzania. OLS and ECM results show that money supply and exchange rate have significant impact on inflation in the short and long run. Further, VAR findings indicate that the current inflation can be influenced by the past state inflation. Therefore, the government of Tanzania is recommended to impose tight monetary policies and expand the proportion of money in the economy from informal to formal transaction. The successful implementation of the suggested indicators to evaluate the inflation in the country will help to cure the instability of inflation, in turn will direct the economy of the country to preferable level.},
 year = {2014}
}

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TY  - JOUR
T1  - The Effects of Money Supply on Inflation in Tanzania
AU  - James Ezekiel Mbongo
AU  - Felician Mutasa
AU  - Robert Ebihart Msigwa
Y1  - 2014/06/30
PY  - 2014
N1  - https://doi.org/10.11648/j.eco.20140302.11
DO  - 10.11648/j.eco.20140302.11
T2  - Economics
JF  - Economics
JO  - Economics
SP  - 19
EP  - 26
PB  - Science Publishing Group
SN  - 2376-6603
UR  - https://doi.org/10.11648/j.eco.20140302.11
AB  - This paper examines the effects of money supply on inflation in Tanzania. This study uses secondary data extracted from two sources, namely; the National Bureau of Statistics (NBS) and Central Bank of Tanzania (BoT), where all variables employed in the analysis are extracted. The study applies OLS, VAR and ECM technique to examine the effect of selected variables on inflation in Tanzania. OLS and ECM results show that money supply and exchange rate have significant impact on inflation in the short and long run. Further, VAR findings indicate that the current inflation can be influenced by the past state inflation. Therefore, the government of Tanzania is recommended to impose tight monetary policies and expand the proportion of money in the economy from informal to formal transaction. The successful implementation of the suggested indicators to evaluate the inflation in the country will help to cure the instability of inflation, in turn will direct the economy of the country to preferable level.
VL  - 3
IS  - 2
ER  -

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Author Information

James Ezekiel Mbongo

Department of Labour and Price, National Bureau of Statistics, Dar es Salaam, Tanzania
Felician Mutasa

The Open University of Tanzania, Dar es Salaam, Tanzania
Robert Ebihart Msigwa

School of Mathematical Sciences, Dalian University of Technology, Dalian, 116024, China P. R

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APA Style

James Ezekiel Mbongo, Felician Mutasa, Robert Ebihart Msigwa. (2014). The Effects of Money Supply on Inflation in Tanzania. Economics, 3(2), 19-26. https://doi.org/10.11648/j.eco.20140302.11

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ACS Style

James Ezekiel Mbongo; Felician Mutasa; Robert Ebihart Msigwa. The Effects of Money Supply on Inflation in Tanzania. Economics. 2014, 3(2), 19-26. doi: 10.11648/j.eco.20140302.11

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AMA Style

James Ezekiel Mbongo, Felician Mutasa, Robert Ebihart Msigwa. The Effects of Money Supply on Inflation in Tanzania. Economics. 2014;3(2):19-26. doi: 10.11648/j.eco.20140302.11

Copy | Download

@article{10.11648/j.eco.20140302.11,
  author = {James Ezekiel Mbongo and Felician Mutasa and Robert Ebihart Msigwa},
  title = {The Effects of Money Supply on Inflation in Tanzania},
  journal = {Economics},
  volume = {3},
  number = {2},
  pages = {19-26},
  doi = {10.11648/j.eco.20140302.11},
  url = {https://doi.org/10.11648/j.eco.20140302.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.eco.20140302.11},
  abstract = {This paper examines the effects of money supply on inflation in Tanzania. This study uses secondary data extracted from two sources, namely; the National Bureau of Statistics (NBS) and Central Bank of Tanzania (BoT), where all variables employed in the analysis are extracted. The study applies OLS, VAR and ECM technique to examine the effect of selected variables on inflation in Tanzania. OLS and ECM results show that money supply and exchange rate have significant impact on inflation in the short and long run. Further, VAR findings indicate that the current inflation can be influenced by the past state inflation. Therefore, the government of Tanzania is recommended to impose tight monetary policies and expand the proportion of money in the economy from informal to formal transaction. The successful implementation of the suggested indicators to evaluate the inflation in the country will help to cure the instability of inflation, in turn will direct the economy of the country to preferable level.},
 year = {2014}
}

Copy | Download

TY  - JOUR
T1  - The Effects of Money Supply on Inflation in Tanzania
AU  - James Ezekiel Mbongo
AU  - Felician Mutasa
AU  - Robert Ebihart Msigwa
Y1  - 2014/06/30
PY  - 2014
N1  - https://doi.org/10.11648/j.eco.20140302.11
DO  - 10.11648/j.eco.20140302.11
T2  - Economics
JF  - Economics
JO  - Economics
SP  - 19
EP  - 26
PB  - Science Publishing Group
SN  - 2376-6603
UR  - https://doi.org/10.11648/j.eco.20140302.11
AB  - This paper examines the effects of money supply on inflation in Tanzania. This study uses secondary data extracted from two sources, namely; the National Bureau of Statistics (NBS) and Central Bank of Tanzania (BoT), where all variables employed in the analysis are extracted. The study applies OLS, VAR and ECM technique to examine the effect of selected variables on inflation in Tanzania. OLS and ECM results show that money supply and exchange rate have significant impact on inflation in the short and long run. Further, VAR findings indicate that the current inflation can be influenced by the past state inflation. Therefore, the government of Tanzania is recommended to impose tight monetary policies and expand the proportion of money in the economy from informal to formal transaction. The successful implementation of the suggested indicators to evaluate the inflation in the country will help to cure the instability of inflation, in turn will direct the economy of the country to preferable level.
VL  - 3
IS  - 2
ER  -

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