Monetary policy transmission through financial markets in Tanzania: examining the macroeconomic impacts

Enock Mwakalila () and Lusekelo Kasongwa ()
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Enock Mwakalila: Mzumbe University
Lusekelo Kasongwa: Mzumbe University

SN Business & Economics, 2025, vol. 5, issue 8, 1-27

Abstract: Abstract Monetary policy is a cornerstone of economic management, shaping financial markets and influencing macroeconomic stability in any economy. In Tanzania, understanding how monetary policy effectively transmits through financial markets to drive growth, stabilize inflation, and influence investment is critical for informed policymaking. This study examines the intricate channels of monetary policy transmission, providing evidence of its impact on financial markets and key macroeconomic outcomes. Quarterly time series data is collected from 2003 to 2024. The vector autoregression model is employed to analyze the transmission of monetary policy through financial markets to macroeconomic outcomes in Tanzania. The results show strong evidence for the effective transmission of monetary policy through financial markets in Tanzania, demonstrating that monetary policy instruments, such as interest rates and the money supply, significantly influence financial market variables, including credit to the private sector, bond yields, and exchange rates. These variables, in turn, act as intermediaries, transmitting the effects of monetary policy to macroeconomic outcomes, such as GDP growth and inflation.

Keywords: Monetary policy; Financial markets; Economic growth; Vector autoregression; Tanzania (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s43546-025-00860-5

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