مجلة بحوث متقدمة في الاقتصاد واستراتيجيات الاعمال
Volume 5, Numéro 1, Pages 26-39
2024-06-30
Does Monetary Policy Matter For Economic Growth In Tanzania? A Critical Analysis
Authors : Miku Benjamine G. . Katunzi Tumaini M. .
Abstract
This paper aims to examine the influence of monetary policy on economic growth of Tanzania utilizing the Autoregressive Distributed Lad model (ARDL). Analysing yearly time series data from 1970 to 2022, the study contributes by offering empirical insights into whether monetary policy impacts economic growth in Tanzania. The empirical findings indicate that in the long run, there is a negative relationship between growth of monetary aggregates (base money M0 and broad/near money M2) and economic growth. There is also a positive relationship between expansion of broader money supply (M3) and the growth of the economy in Tanzania. However, in the short-run the paper discovers a positive relationship between base money (M0) and economic growth and a negative relationship between discount window rate and short-term economic growth. The paper suggests reassessment if the existing monetary policy frameworks in light of the observed negative relationship, continue backing for a conducive monetary policy environment to facilitate positive connection between broader money supply (M3) and economic growth, and considering adjusting the discount window rate to bolster short-time economic growth as well as lowering the discount window rate since it has the potential for incentivizing borrowing and investment thereby stimulating economic activities in the short run.
Keywords
Economic Growth ; Monetary Policy ; Monetary Aggregates ; Discount Rate ; ARDL
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