The Effect of Money Supply on Economic Growth in Tanzania

Abstract

This study aimed at identifying the effect of money supply on economic growth in Tanzania. Different studies have different thoughts on the impact of money supply on economic growth, whereas some studies found that money supply did not affect economic growth. In contrast, others found that the money supply positively affected economic growth. The study used the Bank of Tanzania's secondary time series data from 1980 to 2023. The study employed variables such as economic growth (dependent variable) and M0, M1, M2, and M3 as the independent variables; moreover, the study used the inflation rate as the control variable. The study found that the narrow money and inflation rate significantly affected economic growth. In Tanzania, an increase in narrow money supply positively affected economic growth, and an increase in the inflation rate hurt economic growth. In contrast, the rest of the remaining variables had an insignificant impact on economic growth.