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TanzaniaThe Path to Prosperity$
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Christopher S. Adam, Paul Collier, and Benno Ndulu

Print publication date: 2017

Print ISBN-13: 9780198704812

Published to Oxford Scholarship Online: January 2017

DOI: 10.1093/acprof:oso/9780198704812.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 02 March 2021

Monetary Policy in Tanzania

Monetary Policy in Tanzania

Accomplishments and the Road Ahead

(p.241) 11 Monetary Policy in Tanzania

Pantaleo J. Kessy

Stephen A. O’Connell

Johnson Nyella

Oxford University Press

The Bank of Tanzania (BoT) is on the cusp of a transition from monetary aggregates to interest rates as the operational target of monetary policy. Placing this transition in historical perspective, this chapter emphasizes the conquest of fiscal dominance as a crucial precondition for the emergence of an independent monetary policy in the mid-1990s. It documents the success of reserve-money programming over the ensuing two decades and addresses the emerging limitations of this approach as a framework for constrained discretion. Looking ahead, it argues that a policy-rate system can improve the transparency of monetary policy and strengthen the BoT’s leverage over inflation. Greater stability in short-term interest rates will also enhance the development of the financial sector, a key secondary objective of monetary policy in Tanzania.

Keywords:   Tanzania, fiscal dominance, inflation, reserve-money programming, operational target

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