 Impact of government domestic borrowing on monetary policy rate pass-through in TanzaniaEnock Mwakalila Journal of Policy Modeling, 2025, vol. 47, issue 1, 150-165 Abstract: The central bank should be able to play a role in an economy through monetary policy. Controlling the interest rate is a key monetary policy instrument the central bank uses. Increasing government borrowing from domestic commercial banks in Tanzania may counteract this instrument and its intended impact. Thus, this study empirically analyzes how government debt to commercial banks affects the transmission of monetary policy rates to lending rates in Tanzania. Quarterly time series data is collected from 2010 to 2023. Autoregressive Distributed Lag (ARDL) Model estimation with a bound cointegration test is used to establish the short and long-run relationship, and the results are subjected to diagnostic tests for robustness. The results show that increasing government borrowing from domestic commercial banks prevents the trickle-down effect of the monetary policy (repo) rate on lending rates. Therefore, the study recommends that the government reduce domestic borrowings to fund its budget deficit, especially spending on projects that the private sector can implement better. Keywords: Monetary Policy Rate; Bank Lending Rates; Interest Rate Pass-Through; Government Debt Intervention; Time Series Analysis; Tanzania (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:47:y:2025:i:1:p:150-165 DOI: 10.1016/j.jpolmod.2024.10.003 Access Statistics for this article Journal of Policy Modeling is currently edited by A. M. Costa More articles in Journal of Policy Modeling from Elsevier |
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