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Economic Reform and the Stability of the Demand for Money in Tanzania

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  • Randa, John

Abstract

This paper investigates whether there exists a stationary long-run equilibrium relationship between real money balances, real income, inflation and expected depreciation in Tanzania which can be identified as a money demand function. As the institutional and regulatory framework in Tanzania has undergone a series of changes since economic reforms began in the mid-1980s, shifts in parameters over time might have occurred, causing instability in the money demand function. Using Johansen's maximum likelihood and dynamic modelling procedure, the paper finds equilibrium in the long run and a stable money demand function. These findings imply that, even though economic liberalization and relaxation of controls could have induced instability in the money demand function as conjectured in the literature, such instability was not significant enough to inhibit the estimation of short- and long-run demand for money. Copyright 1999 by Oxford University Press.

Suggested Citation

  • Randa, John, 1999. "Economic Reform and the Stability of the Demand for Money in Tanzania," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 8(3), pages 307-344, October.
  • Handle: RePEc:oup:jafrec:v:8:y:1999:i:3:p:307-44
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    Cited by:

    1. Janvier Nkurunziza, 2004. "How Long Can Inflation Tax Compensate For The Loss Of Government Revenue In War Economies? Evidence From Burundi," Development and Comp Systems 0409065, EconWPA.
    2. Mete Feridun, 2005. "Impact of Monetary Policy on Economic Instability in Turkey (1983 - 2003)," Prague Economic Papers, University of Economics, Prague, vol. 2005(2), pages 171-179.
    3. Janvier Nkurunziza, 2004. "How long can inflation tax compensate for the loss Wof government revenue in war economics? Evidence from Burundi," Economics Series Working Papers WPS/2004-19, University of Oxford, Department of Economics.

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