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Impact of Inflation on Economic Growth: A Case Study of Tanzania

Author

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  • Faraji KASIDI
  • Kenani MWAKANEMELA

Abstract

Like several other countries both industrialised and non-industrialised, one of the central objectives of macroeconomic policies in Tanzania is to promote economic growth and to keep inflation at a low level. However, there has been substantial debate on whether inflation promotes or harms economic growth. Motivated by this controversial, this study examined the impact of inflation on economic growth and established the existence of inflation growth relationship. Time-series data for the period 1990 -2011 were used to examine the impact of inflation on economic growth. Correlation coefficient and co-integration technique established the relationship between inflation and GDP and Coefficient of elasticity were applied to measure the degree of responsiveness of change in GDP to changes in general price levels. Results suggest that inflation has a negative impact on economic growth. The study also revealed that there was no co-integration between inflation and economic growth during the period of study. No long-run relationship between inflation and economic growth in Tanzania.

Suggested Citation

  • Faraji KASIDI & Kenani MWAKANEMELA, 2013. "Impact of Inflation on Economic Growth: A Case Study of Tanzania," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 3(4), pages 363-380.
    • Handle: RePEc:asi:ajoerj:v:3:y:2013:i:4:p:363-380:id:3366
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    Cited by:

    1. Dimakatso Sekwati & Mbulaheni Albert Dagume, 2023. "Effect of Unemployment and Inflation on Economic Growth in South Africa," International Journal of Economics and Financial Issues, Econjournals, vol. 13(1), pages 35-45, January.
    2. Byaro, Mwoya & Pelizzo, Riccardo & Kinyondo, Abel, 2023. "What are the Main Drivers Behind the Acceleration of Tanzania's Economic Growth Over the Past Three Decades?," African Journal of Economic Review, African Journal of Economic Review, vol. 11(4), June.
    3. Whajah, Jennifer & Bokpin, Godfred A. & Kuttu, Saint, 2019. "Government size, public debt and inclusive growth in Africa," Research in International Business and Finance, Elsevier, vol. 49(C), pages 225-240.
    4. Meyer Danie Francois & Chipeta Chama & Camel Richard Thabang Mc, 2018. "An Analysis of the Effectiveness of Interest Rates to Facilitate Price Stability and Economic Growth in South Africa," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 63(3), pages 68-90, December.
    5. Sunusi Yahaya Enejoh & Ahmad Muhammad Tsauni, 2017. "An Analytical Study of the Impact of Inflation on Economic Growth in Nigeria (1970-2016)," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 7(4), pages 110-120, October.
    6. Muhammad Azmat Hayat & Huma Ghulam & Maryam Batool & Muhammad Zahid Naeem & Abdullah Ejaz & Cristi Spulbar & Ramona Birau, 2021. "Investigating the Causal Linkages among Inflation, Interest Rate, and Economic Growth in Pakistan under the Influence of COVID-19 Pandemic: A Wavelet Transformation Approach," JRFM, MDPI, vol. 14(6), pages 1-22, June.
    7. Gideon Minua Kwaku Ampofo & Prosper Basommi Laari & Emmanuel Opoku Ware & Williams Shaw, 2023. "Further investigation of the total natural resource rents and economic growth nexus in resource-abundant sub-Saharan African countries," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 36(1), pages 97-121, January.
    8. Muhammad AZAM KHAN* & Saleem KHAN*, 2018. "INFLATION AND THE ECONOMIC GROWTH: Evidence from Five Asian Countries," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 28(2), pages 235-252.
    9. Md. Sayebur Rahman, 2023. "Exploring the Impact of Inflation on Economic Development in Bangladesh," International Journal of Science and Business, IJSAB International, vol. 19(1), pages 87-96.
    10. Modebe Nwanneka Judith & Ezeaku Hillary Chijindu, 2016. "Dynamics of Inflation and Manufacturing Sector Performance in Nigeria: Analysis of Effect and Causality," International Journal of Economics and Financial Issues, Econjournals, vol. 6(4), pages 1400-1406.
    11. Taderera, Christie & Runganga, Raynold & Mhaka, Simbarashe & Mishi, Syden, 2021. "Inflation, interest rate and economic growth nexuses in SACU countries," MPRA Paper 105419, University Library of Munich, Germany.
    12. Muhammad Azam & Saleem Khan, 2022. "Threshold effects in the relationship between inflation and economic growth: Further empirical evidence from the developed and developing world," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4224-4243, October.
    13. Audi, Marc & Ali, Amjad & Fayad Hamadeh, Hani, 2022. "Nexus among innovations, financial development and economic growth in developing countries," MPRA Paper 115220, University Library of Munich, Germany.
    14. Uddin , Ijaz, 2021. "Impact of inflation on economic growth in Pakistan," Economic Consultant, Roman I. Ostapenko, vol. 34(2), pages 33-41.
    15. Eunice Adu-Darko & Emmanuel K Aidoo, 2022. "Government Stability in the Remittance-Economic Growth Link in Ghana," International Journal of Applied Economics, Finance and Accounting, Online Academic Press, vol. 14(1), pages 1-14.
    16. Helder Eduardo Pinto Afonso, 2021. "Trade Liberalisation and Economic Growth, an Emperical Analysis," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 5(3), pages 95-101, March.
    17. Young Ademola Obafemi, 2022. "Specialization Versus Diversification as Alternative Strategies for Sustainable Growth in Resource-Rich Developing Countries. Case of Nigeria," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 32(3), pages 1-47, September.
    18. Safwat Alaa & Salah Ashraf & Elsherif Marwa, 2021. "The Impact of Foreign Direct Investment on the Economic Growth of Egypt (1980-2018)," International Journal of Economics and Financial Issues, Econjournals, vol. 11(5), pages 74-85.
    19. Hameed, Dr. Gulnaz & Nazir, Sidra & Muhammad, Atta & Saeed, Saira, 2017. "Threshold Modeling for Inflation and GDP Growth," MPRA Paper 90130, University Library of Munich, Germany, revised 2018.
    20. Muhammad Tariq Majeed & Maria Mazhar, 2021. "Managing economic growth through tourism: Does volatility of tourism matter?," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 48(1), pages 49-69, March.
    21. Nyongesa Destaings Nyenyi & Eunice Lubega Amlega & Odhiambo Scholastica, 2017. "The Relationship between Inflation and Economic Growth in East African Community Countries," Noble International Journal of Economics and Financial Research, Noble Academic Publsiher, vol. 2(12), pages 152-162, December.

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