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The currency ratio in Tanzania: an econometric analysis


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  • Ndanshau, Michael O. A.


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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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36871.

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Date of creation: Sep 2004
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Publication status: Published in African Development Review No. 2.Vol. 1(2004): pp. 269-286
Handle: RePEc:pra:mprapa:36871

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Keywords: Currency ration; Tanzania; econometric analysis;

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