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The Demand for Money in Tanzania: A Dynamic Test of Mckinnon's Complementarity Hypothesis

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  • Nicholas M. Odhiambo

    (University of Fort Hare)

Abstract

This paper examines the relevance of McKinnon's complementarity hypothesis in Tanzania using the Johansen-Juselius cointegration method and error-correction model. The study was motivated by the current controversy over the positive role of financial liberalisation on savings, financial deepening, investment efficiency and economic growth. Contrary to the results obtained from some previous studies, the empirical results of this study reveal a strong support for the complementarity between money and physical capital in Tanzania. This applies irrespective of whether the model is estimated in a static long-run formulation (cointegration model) or in the dynamic formulation (error-correction model).

Suggested Citation

  • Nicholas M. Odhiambo, 2004. "The Demand for Money in Tanzania: A Dynamic Test of Mckinnon's Complementarity Hypothesis," The African Finance Journal, Africagrowth Institute, vol. 6(1), pages 21-36.
    • Handle: RePEc:afj:journl:v:6:y:2004:i:1:p:21-36
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    Cited by:

    1. Nicholas Odhiambo, 2010. "Interest rate reforms, financial deepening and economic growth in Tanzania: a dynamic linkage," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 13(2), pages 201-212.
    2. Odhiambo, Nicholas M., 2005. "Money and capital investment in South Africa: A dynamic specification model," Journal of Economics and Business, Elsevier, vol. 57(3), pages 247-258.

    More about this item

    Keywords

    Africa; Tanzania; Financial Liberalisation; Money Demand and Economic Growth;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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