Fiscal Operations, Money Supply and Inflation in Tanzania

"Inflation in Tanzania has exacerbated the economic crisis. Government and policy makers have recognized the seriousness of the phenomenon in the economy. Though they have designed policies to curb it, amazingly, inflation is still uncontrollable. The purpose of this study is to increase the understanding of the Tanzanian inflation by investigating the link between fiscal operations, money supply and inflation.It is hypothesized that this connection between fiscal operations and money supply growth has contributed to inflation. This study aims to present some policy options for government budgetary operations that do not effect monetary growth and could also curb inflation developments in the country. The next section of the study gives a brief background of fiscal operations, monetary movements and inflationary developments in Tanzania. Section III reviews literature while Section IV outlines the analytical framework. Section V displays estimation results and section VI presents simulation results. The study ends with a summary and conclusions."