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

Nicholas Odhiambo

The African Finance Journal, 2004, vol. 6, issue 1, 21-36

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).

Keywords: Africa; Tanzania; Financial Liberalisation; Money Demand and Economic Growth (search for similar items in EconPapers)
JEL-codes: E42 E44 (search for similar items in EconPapers)
Date: 2004
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Handle: RePEc:afj:journl:v:6:y:2004:i:1:p:21-36