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Financial Architecture and the Monetary Transmission Mechanism in Tanzania


  • Peter Montiel
  • Christopher Adam
  • Wilfred Mbowe
  • Stephen O’Connell


This paper is the outcome of research collaboration between staff of the Department of Economic Research and Policy at the Bank of Tanzania and the International Growth Centre. Its objective is to develop a systematic approach to the investigation of the effectiveness of monetary transmission in low-income countries that can be applied specifically to the five EAC countries. In the vast majority of low-income countries, financing and political constraints have traditionally impaired the usefulness of fiscal policy as a short-run stabilization device. While fiscal dominance has also impaired the effectiveness of monetary policy, this situation has been changing, as many low-income countries have increased the independence of their central banks. The ability of central banks to carry out this stabilization function, however, depends on the strength and reliability of the links between the policy instruments that they control and aggregate demand – i.e., on the effectiveness of monetary transmission. Unfortunately, this effectiveness cannot be taken for granted. Using Tanzania as a case study, Peter Montiel et al. undertake a systematic exploration of this issue.

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  • Peter Montiel & Christopher Adam & Wilfred Mbowe & Stephen O’Connell, 2012. "Financial Architecture and the Monetary Transmission Mechanism in Tanzania," CSAE Working Paper Series 2012-03, Centre for the Study of African Economies, University of Oxford.
  • Handle: RePEc:csa:wpaper:2012-03

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    References listed on IDEAS

    1. Sm ali Abbas & Yuri v. Sobolev, 2009. "High And Volatile Treasury Yields In Tanzania: The Role Of Strategic Bidding And Auction Microstructure," South African Journal of Economics, Economic Society of South Africa, vol. 77(2), pages 257-281, June.
    2. Roe, Alan R & Sowa, Nii K, 1997. "From Direct to Indirect Monetary Control in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(1), pages 212-264, March.
    3. Paola Giuliano & Prachi Mishra & Antonio Spilimbergo, 2013. "Democracy and Reforms: Evidence from a New Dataset," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(4), pages 179-204, October.
    4. Bagliano, Fabio C. & Favero, Carlo A., 1998. "Measuring monetary policy with VAR models: An evaluation," European Economic Review, Elsevier, vol. 42(6), pages 1069-1112, June.
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    Cited by:

    1. Saoussen Ouhibi & Sami Hammami, 2015. "The Transmission Mechanisms for Monetary Policy: The Case of Emerging Countries," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 3(12), pages 568-576, December.
    2. Mishra, Prachi & Montiel, Peter, 2013. "How effective is monetary transmission in low-income countries? A survey of the empirical evidence," Economic Systems, Elsevier, vol. 37(2), pages 187-216.
    3. Machava, Agostinho & Brännäs, Kurt, 2015. "Mozambican Monetary Policy and the Yield Curve of Treasury Bills - An Empirical Study," Umeå Economic Studies 918, Umeå University, Department of Economics.
    4. Nyorekwa, Enock Twinoburyo & Odhiambo, Nicholas Mbaya, 2016. "Can monetary policy drive economic growth? empirical evidence from Tanzania," Working Papers 21122, University of South Africa, Department of Economics.
    5. Nyorekwa, Enock Twinoburyo & Odhiambo, Nicholas Mbaya, 2016. "Monetary policy and economic growth in Kenya:The role of money supply and interest rates," Working Papers 20712, University of South Africa, Department of Economics.
    6. Montiel, Peter J., 2015. "Monetary transmission in low-income countries : an overview," ILO Working Papers 994881153402676, International Labour Organization.

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