The Effect of Inflation on Economic Growth in Tanzania for the Period of 1970-2020

Goodluck Sanga; Mukole Kongolo; Rosemary Mnongya

doi:doi:10.11648/j.jbed.20230801.14

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The Effect of Inflation on Economic Growth in Tanzania for the Period of 1970-2020

Goodluck Sanga, Mukole Kongolo, Rosemary Mnongya

Published in Journal of Business and Economic Development (Volume 8, Issue 1)

Received: 16 October 2022 Accepted: 31 October 2022 Published: 22 May 2023

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Abstract

The research examines the effect of inflation on economic growth in Tanzania. The study employs the secondary time series data from 1970 to 2020 taken from the Bank of Tanzania, and the VECM is used to find the cointegration between variables to show the short-run and long-run dynamics. Graphical analysis and Augmented Dickey-Fuller tests are conducted to find the unit root in the model. All variables are stationary and integrated in the same order I(1). The results show that the error correction is significantly negative. That is, the annual rate of adjustment required to achieve long-run equilibrium is 28.31 percent. Based on the findings in the short-run, the extended money supply and interest rates have negative and insignificant effects on GDP, while the exchange rate has an inversely significant effect on GDP. Inflation targeting has a favourable insignificant effect on GDP. Long-run results show that extended money supply, exchange rates, and interest rates have positive significant effects on economic growth, whereas inflation targetinghas negative significant effects on GDP. It is recommended that the government, policymakers, and financial institutions focus on managing inflation by the prudent implementation of fiscal and monetary policies and maintaining a regulation of interest rates, the extended money supply, and real exchange rates also inflation targeting should be emphasised by improving the central bank's communication, transparency, and accountability to avoid inflation volatility and stimulate economic growth.

Published in	Journal of Business and Economic Development (Volume 8, Issue 1)
DOI	10.11648/j.jbed.20230801.14
Page(s)	22-31
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Inflation, Economic Growth, Inflation Targeting, Tanzania

References

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[15]	Mukoka, S. (2018). An Econometrical Assessment of the Impact of Inflation on Economic Growth: case study of Zimbabwe Economy. Economy, Economics, Vol 7 (1), 17-22. doi: 10.11648/j.eco.20180701.13.
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APA Style

Goodluck Sanga, Mukole Kongolo, Rosemary Mnongya. (2023). The Effect of Inflation on Economic Growth in Tanzania for the Period of 1970-2020. Journal of Business and Economic Development, 8(1), 22-31. https://doi.org/10.11648/j.jbed.20230801.14

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ACS Style

Goodluck Sanga; Mukole Kongolo; Rosemary Mnongya. The Effect of Inflation on Economic Growth in Tanzania for the Period of 1970-2020. J. Bus. Econ. Dev. 2023, 8(1), 22-31. doi: 10.11648/j.jbed.20230801.14

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AMA Style

Goodluck Sanga, Mukole Kongolo, Rosemary Mnongya. The Effect of Inflation on Economic Growth in Tanzania for the Period of 1970-2020. J Bus Econ Dev. 2023;8(1):22-31. doi: 10.11648/j.jbed.20230801.14

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@article{10.11648/j.jbed.20230801.14,
  author = {Goodluck Sanga and Mukole Kongolo and Rosemary Mnongya},
  title = {The Effect of Inflation on Economic Growth in Tanzania for the Period of 1970-2020},
  journal = {Journal of Business and Economic Development},
  volume = {8},
  number = {1},
  pages = {22-31},
  doi = {10.11648/j.jbed.20230801.14},
  url = {https://doi.org/10.11648/j.jbed.20230801.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jbed.20230801.14},
  abstract = {The research examines the effect of inflation on economic growth in Tanzania. The study employs the secondary time series data from 1970 to 2020 taken from the Bank of Tanzania, and the VECM is used to find the cointegration between variables to show the short-run and long-run dynamics. Graphical analysis and Augmented Dickey-Fuller tests are conducted to find the unit root in the model. All variables are stationary and integrated in the same order I(1). The results show that the error correction is significantly negative. That is, the annual rate of adjustment required to achieve long-run equilibrium is 28.31 percent. Based on the findings in the short-run, the extended money supply and interest rates have negative and insignificant effects on GDP, while the exchange rate has an inversely significant effect on GDP. Inflation targeting has a favourable insignificant effect on GDP. Long-run results show that extended money supply, exchange rates, and interest rates have positive significant effects on economic growth, whereas inflation targetinghas negative significant effects on GDP. It is recommended that the government, policymakers, and financial institutions focus on managing inflation by the prudent implementation of fiscal and monetary policies and maintaining a regulation of interest rates, the extended money supply, and real exchange rates also inflation targeting should be emphasised by improving the central bank's communication, transparency, and accountability to avoid inflation volatility and stimulate economic growth.},
 year = {2023}
}

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TY  - JOUR
T1  - The Effect of Inflation on Economic Growth in Tanzania for the Period of 1970-2020
AU  - Goodluck Sanga
AU  - Mukole Kongolo
AU  - Rosemary Mnongya
Y1  - 2023/05/22
PY  - 2023
N1  - https://doi.org/10.11648/j.jbed.20230801.14
DO  - 10.11648/j.jbed.20230801.14
T2  - Journal of Business and Economic Development
JF  - Journal of Business and Economic Development
JO  - Journal of Business and Economic Development
SP  - 22
EP  - 31
PB  - Science Publishing Group
SN  - 2637-3874
UR  - https://doi.org/10.11648/j.jbed.20230801.14
AB  - The research examines the effect of inflation on economic growth in Tanzania. The study employs the secondary time series data from 1970 to 2020 taken from the Bank of Tanzania, and the VECM is used to find the cointegration between variables to show the short-run and long-run dynamics. Graphical analysis and Augmented Dickey-Fuller tests are conducted to find the unit root in the model. All variables are stationary and integrated in the same order I(1). The results show that the error correction is significantly negative. That is, the annual rate of adjustment required to achieve long-run equilibrium is 28.31 percent. Based on the findings in the short-run, the extended money supply and interest rates have negative and insignificant effects on GDP, while the exchange rate has an inversely significant effect on GDP. Inflation targeting has a favourable insignificant effect on GDP. Long-run results show that extended money supply, exchange rates, and interest rates have positive significant effects on economic growth, whereas inflation targetinghas negative significant effects on GDP. It is recommended that the government, policymakers, and financial institutions focus on managing inflation by the prudent implementation of fiscal and monetary policies and maintaining a regulation of interest rates, the extended money supply, and real exchange rates also inflation targeting should be emphasised by improving the central bank's communication, transparency, and accountability to avoid inflation volatility and stimulate economic growth.
VL  - 8
IS  - 1
ER  -

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Author Information

Goodluck Sanga

Department of Economics, St. Augustine University of Tanzania, Mwanza, Tanzania
Mukole Kongolo

Department of Economics, St. Augustine University of Tanzania, Mwanza, Tanzania
Rosemary Mnongya

Department of Economics, St. Augustine University of Tanzania, Mwanza, Tanzania

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Plain Text BibTeX RIS

APA Style

Goodluck Sanga, Mukole Kongolo, Rosemary Mnongya. (2023). The Effect of Inflation on Economic Growth in Tanzania for the Period of 1970-2020. Journal of Business and Economic Development, 8(1), 22-31. https://doi.org/10.11648/j.jbed.20230801.14

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ACS Style

Goodluck Sanga; Mukole Kongolo; Rosemary Mnongya. The Effect of Inflation on Economic Growth in Tanzania for the Period of 1970-2020. J. Bus. Econ. Dev. 2023, 8(1), 22-31. doi: 10.11648/j.jbed.20230801.14

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AMA Style

Goodluck Sanga, Mukole Kongolo, Rosemary Mnongya. The Effect of Inflation on Economic Growth in Tanzania for the Period of 1970-2020. J Bus Econ Dev. 2023;8(1):22-31. doi: 10.11648/j.jbed.20230801.14

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@article{10.11648/j.jbed.20230801.14,
  author = {Goodluck Sanga and Mukole Kongolo and Rosemary Mnongya},
  title = {The Effect of Inflation on Economic Growth in Tanzania for the Period of 1970-2020},
  journal = {Journal of Business and Economic Development},
  volume = {8},
  number = {1},
  pages = {22-31},
  doi = {10.11648/j.jbed.20230801.14},
  url = {https://doi.org/10.11648/j.jbed.20230801.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jbed.20230801.14},
  abstract = {The research examines the effect of inflation on economic growth in Tanzania. The study employs the secondary time series data from 1970 to 2020 taken from the Bank of Tanzania, and the VECM is used to find the cointegration between variables to show the short-run and long-run dynamics. Graphical analysis and Augmented Dickey-Fuller tests are conducted to find the unit root in the model. All variables are stationary and integrated in the same order I(1). The results show that the error correction is significantly negative. That is, the annual rate of adjustment required to achieve long-run equilibrium is 28.31 percent. Based on the findings in the short-run, the extended money supply and interest rates have negative and insignificant effects on GDP, while the exchange rate has an inversely significant effect on GDP. Inflation targeting has a favourable insignificant effect on GDP. Long-run results show that extended money supply, exchange rates, and interest rates have positive significant effects on economic growth, whereas inflation targetinghas negative significant effects on GDP. It is recommended that the government, policymakers, and financial institutions focus on managing inflation by the prudent implementation of fiscal and monetary policies and maintaining a regulation of interest rates, the extended money supply, and real exchange rates also inflation targeting should be emphasised by improving the central bank's communication, transparency, and accountability to avoid inflation volatility and stimulate economic growth.},
 year = {2023}
}

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TY  - JOUR
T1  - The Effect of Inflation on Economic Growth in Tanzania for the Period of 1970-2020
AU  - Goodluck Sanga
AU  - Mukole Kongolo
AU  - Rosemary Mnongya
Y1  - 2023/05/22
PY  - 2023
N1  - https://doi.org/10.11648/j.jbed.20230801.14
DO  - 10.11648/j.jbed.20230801.14
T2  - Journal of Business and Economic Development
JF  - Journal of Business and Economic Development
JO  - Journal of Business and Economic Development
SP  - 22
EP  - 31
PB  - Science Publishing Group
SN  - 2637-3874
UR  - https://doi.org/10.11648/j.jbed.20230801.14
AB  - The research examines the effect of inflation on economic growth in Tanzania. The study employs the secondary time series data from 1970 to 2020 taken from the Bank of Tanzania, and the VECM is used to find the cointegration between variables to show the short-run and long-run dynamics. Graphical analysis and Augmented Dickey-Fuller tests are conducted to find the unit root in the model. All variables are stationary and integrated in the same order I(1). The results show that the error correction is significantly negative. That is, the annual rate of adjustment required to achieve long-run equilibrium is 28.31 percent. Based on the findings in the short-run, the extended money supply and interest rates have negative and insignificant effects on GDP, while the exchange rate has an inversely significant effect on GDP. Inflation targeting has a favourable insignificant effect on GDP. Long-run results show that extended money supply, exchange rates, and interest rates have positive significant effects on economic growth, whereas inflation targetinghas negative significant effects on GDP. It is recommended that the government, policymakers, and financial institutions focus on managing inflation by the prudent implementation of fiscal and monetary policies and maintaining a regulation of interest rates, the extended money supply, and real exchange rates also inflation targeting should be emphasised by improving the central bank's communication, transparency, and accountability to avoid inflation volatility and stimulate economic growth.
VL  - 8
IS  - 1
ER  -

Copy | Download