Browsing by Author "Phiri, Joel H. K."

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    Income velocity of circulation: its trend and determinants in Tanzania 1966-1987.
    (University of Dar es Salaam, 1989) Phiri, Joel H. K.
    The purpose of the study was to empirically examine the behaviour of the income velocity of circulation. More specifically the study attempted to examine the trend, magnitude and factors determining the income velocity of circulation. Time series data for the period 1966-87 was used. The following hypotheses were tested. The income velocity of circulation is (I) directly related to the real Gross Domestic Product (GDP). (ii) directly related to the rate of interest (iii) directly related to the cost of holding money as measured by the acceleration of the price level (iv) directly related to the monetization of the economy as represented by the number of bank branches. The results confirmed all the above hypotheses, that is the real income, real rate of interest, the expected rate of change of prices and the number of Bank branches are important variables in explaining variation in the income velocity of circulation. However, these variables explained at most 75% of the variation implying that additional factors should be incorporated. The empirical findings reveals further that the income velocity of circulation is not a very useful concept in policy formulation in Tanzania and therefore prediction and economic policy based on a quantity theory is subject to substantial error in Tanzania. However, there is still room for improvement. i.e. it is recommended that future research should be directed to identifying additional factors that may enter into the velocity of circulation is to be a useful concept at all. This may in turn call for an entirely different methodology with more powerful tools of analysis.