BUDGET DEFICIT AND INFLATION IN TANZANIA: ARDL BOUND TEST APPROACH

Yıl 2018, Cilt: 7 Sayı: 1, 83 - 88, 30.03.2018

Godwin Aloyce Myovella Zakayo Samson Kisava

https://doi.org/10.17261/Pressacademia.2018.797

Öz

Purpose -  The study
aimed at analyzing the existence of the long run relationship between the
government budget deficits and inflation in Tanzania.

Methodology - We used annual time series data for the budget deficit
and inflation from 1970 to 2015 sourced from International Monetary Fund (IMF)
database.  Autoregressive Distributed Lag
(ARDL) bound test approach Pesaran and Shin (2001) was used.

Findings-  Our results
revealed the positive relationship and existence of the long-run relationship
between budget deficits and inflation. The coefficient of the speed of
adjustment is significant at 5 percent; the whole system can get back to the
equilibrium at the speed of adjustment of 72% towards a long run.

Conclusion- We suggest the government to adopt measures that would
reduce the large budget deficit that has been growing over time. This would be
one of the necessary conditions in reducing inflation over time and thereby the
high economic growth witnessed can be sustainable.

Anahtar Kelimeler

ARDL model, budget deficit, Inflation, long run, Tanzania

Kaynakça

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