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Can monetary policy drive economic growth? empirical evidence from Tanzania

Listed author(s):
  • Nyorekwa, Enock Twinoburyo
  • Odhiambo, Nicholas Mbaya

The role of monetary policy in promoting economic growth remains empirically an open research question. This paper attempts to bridge the knowledge gap by investigating the impact of monetary policy on economic growth in Tanzania during the period from 1975 to 2013 ??? using the autoregressive distributed lag (ARDL) bounds-testing approach. The study uses two proxies of monetary policy, namely, money supply and interest rate, to examine this linkage. The empirical results of this study confirm the existence of long-run monetary policy neutrality ??? irrespective of the proxy used to measure monetary policy. However, the short-run results only confirm the existence of monetary policy neutrality ??? but only when the interest rate is used as a proxy for monetary policy. When money supply is used to measure monetary policy, a negative relationship between monetary policy and economic growth is found to predominate

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Paper provided by University of South Africa, Department of Economics in its series Working Papers with number 21122.

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Date of creation: Aug 2016
Handle: RePEc:uza:wpaper:21122
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