Budget Deficits, Money Supply and Inflation in Tanzania: A Multivariate Granger Causality Test, 1967–2010

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dc.contributor.authorNdanshau, Michael O. A.
dc.date.accessioned2016-05-06T14:17:09Z
dc.date.available2016-05-06T14:17:09Z
dc.date.issued2012
dc.description.abstractThis paper investigates empirically the nexus between budget deficits, money supply and inflation in Tanzania by employing data for the period 1967 – 2010. Pair-wise Granger causality test established a one-way causal effect, running from inflation to budget deficit and the monetary base. These findings were supported by results from the Vector Error correction model (VECM) estimated. It is shown that there exist a significant inflation inertia and causal effect on budget deficit over the short-run. The VECM results showed that shift in monetary policy regime exerted a significant effect on inflation and budget deficits. Innovation of the ratio of budget deficit to money balances as alternatives for the traditional budget deficit to income ratio was found to lack significant effect on the results. Results are very indicative but highlight the importance of containing inflation to check its effect on budget deficits over the short-to long-run periods. The results also suggest that robust econometric results can be obtained by deflating budget deficits by monetary aggregates or income.en_US
dc.identifier.citationNdanshau, M.O., 2012. Budget Deficits, Money Supply and Inflation in Tanzania: A Multivariate Granger Causality Test, 1967–2010. University of Dar es Salaam Working Paper, (04/12). Vancouveren_US
dc.identifier.urihttp://hdl.handle.net/20.500.11810/1880
dc.language.isoenen_US
dc.subjectInflationen_US
dc.subjectFiscal deficitsen_US
dc.subjectMoney supplyen_US
dc.subjectGranger causalityen_US
dc.subjectVector error correction modelen_US
dc.titleBudget Deficits, Money Supply and Inflation in Tanzania: A Multivariate Granger Causality Test, 1967–2010en_US
dc.typeWorking Paperen_US
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