Browsing by Author "Missango, Suleiman"

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    Demand for money and the conduct of monetary policy in East African countries
    (University of Dar es Salaam, 2014) Missango, Suleiman
    This study applied the bounds testing approach and four error-correction-based panel cointegration procedures to examine the stability of demand for money function in the East African countries (namely, Tanzania, Kenya, Uganda, Rwanda and Burundi) using quarterly data on broad money supply, income, interest rates and exchange rate for the period from 1995 to 2012. Given that during most of the period, money supply growth in the five East African countries was above the targets when inflation was either below or above the reference target, it was important to ascertain whether the money supply growth-inflation nexus reflected instability of demand for money function or was due to errors of the central banks of these countries in designing and implementing monetary policy. In addition, whereas the five countries are focused on the agenda to form a monetary union under the East African Community (EAC), the selecting of the appropriate monetary policy framework for the envisaged monetary union based on the empirical money demand analysis had not been given attention. The application of the bound testing approach to the data points to the existence of a stable money demand functions in Rwanda and Burundi; but unstable in Tanzania, Kenya, and Uganda. The findings from panel cointegration testing revealed that the money demand function for the five East African countries was unstable. Therefore, the study recommends that an alternative monetary policy framework, such as inflation targeting, need to be considered in Tanzania, Kenya and Uganda; and for the proposed monetary union.
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    Stability of money demand function in Tanzania during the reform period.
    (University of Dar es Salaam, 2003) Missango, Suleiman
    This study analyses the stability of money demand function using M2 and M3 monetary aggregates over the 1986-2001 period. The analysis begins by examining stationarity and cointegrating relationship among the variables. The long-run parameters of money demand functions for Tanzania's M2 and M3 aggregates are estimated within the framework of vector autoregression. Finally, the stability of the two models is investigated. For each model, a single cointegrating vector is found. The hypothesis that income, inflation, interest rates, and exchange rate are the long-run determinants of the demand for money in Tanzania is not rejected. The short-run money demand equation is analyzed within a small Vector Error Correction framework and the statistical properties of the estimated model are generally good. On stability front, the study suggests that money demand function using M2 and M3 aggregates are generally stable over the sample period. It is worthy citing that the hypothesis that M2 is more stable than M3 is inconclusive. However, testing forecast performance, M3 aggregate seems to be superior to M2 aggregate, providing some positive signs that the M3 model is more stable than the M2 model as it suffers little structural break during the period of estimation. One important policy implication from the results is that monetary targeting by Central Bank of Tanzania (BoT) is feasible and that M3 is the most appropriate target variable for achieving price stability.