Browsing by Author "Kabelwa, George Michael"

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    An empirical investigation of seigniorage behaviour in Tanzania 1967-1997.
    (University of Dar es Salaam, 1999) Kabelwa, George Michael
    The Tanzania economy has been characterised by persistent fiscal deficits for most of the 1967-1997 period. Whereas tax reforms provide a long-run solution to fiscal deficits, money creation which generates seigniorage revenue, can act as a short run solution provided that the process is optimally done. By analysing the behaviour of seigniorage in Tanzania during the 1967-1997 period, this study investigates two main issues. The first issue is whether decisions on seigniorage generations have been optimally set. Second, the study seeks to identify factors that have influenced the level of seigniorage revenue in Tanzania. Empirical findings of the tax smoothing hypotheses show decisions on seigniorage revenue generation as not followed the optimal taxation principles since no cointegration is found among the tax rate, inflation and the income velocity of money. Using the Error Correction Model, empirical findings indicate seigniorage revenue being directly related to Gross Domestic Product and inversely related to the money multiplier and the nominal exchange rate. Past values of treasury bill discount rate, foreign interest rate, domestic inflation, and official bank reserve requirements have provided mixed effects' to the level of seigniorage revenue. The main conclusion is that seigniorage generation should start abiding to the optimal taxation principles. This policy should be guided by the behaviour of the current and past values of the various economic variables that influence the level of seigniorage revenue.