The Effect of Inflation on Economic Growth in Tanzania

Abstract

The question of the effect of inflation on economic growth is one of the issues that have been hotly debated in macroeconomics. While some scholars, particularly those learning towards the Keynesian and Structural perspectives tend to believe that inflation is not harmful to economic growth, other scholars, particularly those in the monetarist tradition, argue that inflation is harmful to economic growth. In this study, use is made of the Least Trimmed Squares (LTS) method, as introduced by Rousseeuw and Leroy (1987), which detects regression outliers and produces robust regression, to examine the impact of inflation on economic growth in Tanzania. The empirical results obtained suggest that inflation has been harmful to economic growth in Tanzania. Key Words: Inflation, economic growth, regression outliers, robust regression. African Journal of Finance and Management Vol.9(1) 2000: 70-77