Exchange rate dynamics in Tanzania
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Date
2015
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Publisher
Mzumbe University
Abstract
The dissertation examines the factors affecting Exchange rate dynamics in Tanzania. The study was conducted on some major factors affecting exchange rate dynamics in Tanzania, and their relative importance. Annual data were employed for the period 1990-2013 collected from National Bureau of Statistics, Bank of Tanzania and World data indicators. The variables for the study were Inflation, Imports and Exports, Foreign currency reserve, and Government Debt Service on Exchange rate. Time series multivariate regression model was used to analyse the results. Johansenn cointegration test revealed that long run relationship exists among the variables and VECM results revealed short-run and long-run causality exists among the variables. Tanzania currency has depreciated a great since the year 1990, as a result of which Tanzania exports become costly in the international market and lost the competitiveness and imports became cheap due to which the balance of trade got affected. The study revealed that Export is the main factor affecting exchange rate in Tanzania. The study further showed that the second important variable which brought more dynamics in exchange rate was foreign currency reserve, and then the third important variable which brought more dynamics in exchange rate was inflation rate, while order imports and debt service lay at the fourth and fifth positions. Central bank needs to insure that such factors are controlled and there should be strict control over the foreign exchange market and Banks. The dynamics of the exchange rates had an adverse effect on the economy. Based on the findings of the study it was recommended to harmonise fiscal policies with monetary policy first and then make effective link of both these policies with trade policy. Keywords: Johansen test, Vector Error Correction Model, Depreciate, Appreciation, Inflation, Imports, Exports, Debt service and foreign currency reserve.
Description
A dissertation submitted in partial fulfillment of the requirements for award of the Degree of Master of Science in Accounting and Finance (MSc A&F) of Mzumbe University
Keywords
Exchange rate, Rate dynamics -Tanzania, Foreign currency
Citation
APA