The Currency Ratio in Tanzania: An Econometric Analysis
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Date
2004-12
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Abstract
This study tested some key hypotheses on the determinants
of the currency ratio in Tanzania. The econometric results suggest that
real income is, as theorized, negatively related to and a significant determinant
of the currency ratio in Tanzania. The estimated income elasticity
coefficient, found to be far less than unity, suggests there is poor substitution
between currency and demand deposits in Tanzania. The results
also showed that expected inflation was negatively related to the currency
ratio in Tanzania. While the structural adjustment programme was found
to increase and shift upward the currency ratio function in Tanzania, the
liberalization of the financial sector was found to shift decrease and shift
downward the currency ratio function. Most institutional variables were
found to lack the expected sign and significance in explaining the currency
ratio in Tanzania, probably because of inadequacy of the proxies
used.
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Ndanshau, M.O., 2004. The currency ratio in Tanzania: an econometric analysis. African Development Review, 16(2), pp.269-286.