The Determinants of Money Multiplier in Tanzania
Loading...
Date
2005
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
The main purpose of this paper was to investigate the behaviour and stability of the money multiplier in
Tanzania by using un-deseasonalised data for the period 1986:II-2005:I. The results show that short-term
interest rates were not significant determinants of the money supply in Tanzania. This finding supports the
theory on exogeneity of money supply determination. Even though, both descriptive and regression analyses
indicated that the elasticities of the narrow and broad money together with their multipliers were unstable prior
to the implementation of market clearing monetary policy regime started in 1993. Moreover, the results attest
to existence of a sluggish adjustment of equilibrium money stock to changes in monetary base. This is a typical
outcome in economies with nascent financial markets; and, suggests that expansionary monetary policy through
open market operations would be inflationary. In general the result suggests that the central bank in Tanzania
can, in the due cause, be able to a big extent to control monetary expansion by controlling the base money.
Granted, the slight instability in the money multipliers could be controlled for in monetary programming by
either accommodating in monetary base or influencing the behaviour of the nonbank sector by other policy
measures.
Description
Keywords
Money multiplier, Tanzania
Citation
Ndanshau, M.O., The Determinants of Money Multiplier in Tanzania.