Central Bank Autonomy, The Money Stock And Price Developments In Tanzania

Abstract

Beginning the mid 1980s to the present the Bank of Tanzania has used a number of instruments that have implications on its balance sheet, namely: those of commercial banks and those of other financial institutions. The size of the BOTs balance sheet relative to the rest of the banking system has implications on movement in monetary variables and hence prices. This artcle uses on econometric model to analyse central bank policy on the money stock and prices by investigating the relationship among the components of the balance sheet using data from the BOT spanning from 1986 to 2001. The results indicate that the behavior of the BOTs balance sheet has strong implications of movements of the money stock. The policy implication is that allowing the central bank to adjust its balance sheet has effect on changes of the money stock and therefore brings more control of price developments.
African Journal of Finance and Management Vol.13(1) 2004: 48-62