Date Log
Submitted
September 29, 2022
Published
December 30, 2019
Inflation, Exchange Rate, and Money Supply Nexus in Tanzania:
Application of the ARDL Bounds Testing Approach
Corresponding Author(s) : Mursali A. Milanzi
mamilanzi@mzumbe.ac.tz
The UONGOZI Journal of Management and Development Dynamics ,
Vol. 29 No. 2 (2019): The UONGOZI Journal of Management and Development Dynamics
Abstract
The interrelationships among inflation, money supply, and exchange rates are a widely researched area. However, the findings and conclusions are yet contentious hence, our knowledge of the nexus among the variables remain elusive. Using annual time series data (1970-2015) from Tanzania, the study examines the nexus among inflation, money supply, and exchange rate. Using the ARDL bounds testing approach, the study reveals the existence of a long-run equilibrium relation among inflation, money supply, and exchange rates. Furthermore, money supply and exchange rate also have a short-run dynamic causal effect on inflation. The estimated error correction coefficient of -0.73 suggests about 73 percent of the disequilibrium is corrected within a year. This speed of adjustment towards the equilibrium is quite high. Study’s findings support the contention that inflation is a monetary phenomenon in Tanzania. Similarly, the exchange rate pass-through is also a very notable phenomenon. In light of the findings, proper monetary policies such as tightening money supply is required to continue keeping inflation low and stable.
Keywords
Money Supply
Inflation
Exchange rate
ARDL
Bounds testing
Tanzania
Milanzi, M. A., & Sanga, H. (2019). Inflation, Exchange Rate, and Money Supply Nexus in Tanzania: : Application of the ARDL Bounds Testing Approach. The UONGOZI Journal of Management and Development Dynamics, 29(2). https://doi.org/10.69522/uongozi.v29i2.15
Download Citation
Endnote/Zotero/Mendeley (RIS)BibTeX