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Can monetary policy drive economic growth? Empirical evidence from Tanzania

Enock Twinoburyo Nyorekwa and Nicholas Odhiambo

No 21122, Working Papers from University of South Africa, Department of Economics

Abstract: 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

Keywords: Monetary Policy; Economic Growth; Interest Rate; Money Supply (search for similar items in EconPapers)
Date: 2016-08
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-mac and nep-mon
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Journal Article: Can Monetary Policy drive economic growth? Empirical evidence from Tanzania (2018) Downloads
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