Suleiman, Najat Nassor and Jamaludin, Husna and Mujahid, Hira (2026) The dynamics of exchange rate pass-through to consumer prices in Tanzania: pre- and post-liberalisation analysis. International Journal of Academic Research in Economics and Management Sciences, 15 (1). pp. 311-332. ISSN 2226-3624
|
PDF
- Published Version
Download (607kB) | Preview |
Abstract
This study examines the relationship between exchange rate pass-through and inflation in Tanzania from 1988 to 2023, highlighting the effects of exchange rate fluctuations on consumer prices within an open economy. The Vector Error Correction Model indicates a significant long-term relationship between exchange rates and inflation. Granger causality tests demonstrate a bidirectional causal relationship between exchange rates and inflation, alongside a unidirectional influence from exchange rates to money supply, highlighting the significant impact of exchange rate dynamics on inflationary trends. Impulse response functions show that while the immediate effect of exchange rate shocks on inflation is modest, it intensifies over time and stabilises thereafter. Variance decomposition further identifies money supply as a key driver of inflation, particularly in the long run. Prior to liberalisation, ERPT was weak and statistically insignificant; post-liberalisation, however, it became negative and persistent, suggesting that stronger monetary policy frameworks and enhanced central bank independence have moderated inflationary pressures. The findings highlight the significance of exchange rate stability in maintaining price control and affirm the effectiveness of liberalisation in strengthening Tanzania’s monetary transmission mechanism
| Item Type: | Article (Journal) |
|---|---|
| Uncontrolled Keywords: | Exchange Rate Pass-Through, Inflation Dynamics, Monetary Policy, Monetary Transmission Mechanism, Tanzania |
| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HB Economic Theory > HB3711 Business cycles. Economic fluctuations H Social Sciences > HB Economic Theory > HB71 Economics as a science |
| Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button): | Kulliyyah of Economics and Management Sciences > Department of Economics |
| Depositing User: | Dr husna jamaludin |
| Date Deposited: | 19 Feb 2026 11:59 |
| Last Modified: | 19 Feb 2026 11:59 |
| Queue Number: | 2026-02-Q2195 |
| URI: | http://irep.iium.edu.my/id/eprint/127492 |
Actions (login required)
 |
View Item |
Download Statistics
Download Statistics