The Nexus between Macroeconomic Factors and Petroleum Prices in Tanzania: Evidence from 1990 to 2023
Keywords:
Exchange rate, Inflation, Macroeconomic factors, Petroleum pricesAbstract
This study examines the influence of key macroeconomic variables specifically the inflation rate, Gross Domestic Product (GDP), and exchange rate fluctuations on petroleum prices in Tanzania from 1990 to 2023. Using a quantitative approach and the Autoregressive Distributed Lag model, the study assesses both short-run and long-run effects of these variables on petroleum price stability. The results reveal no long-term Cointegration indicating that inflation, GDP, and exchange rates do not significantly influence petroleum prices in the long run. In contrast, the short-run analysis found that exchange rate fluctuations have a statistically significant impact on petroleum prices in the short run resulting in the rejection of the null hypothesis for GDP. Inflation, however, remained statistically insignificant in both the short and long run, supporting the acceptance of the null hypothesis for inflation. The study concludes that while the long-term effects of these macroeconomic variables on petroleum prices are negligible, short-term fluctuations in exchange rates and GDP have a significant impact. Policymakers are advised to focus on stabilizing exchange rates and fostering GDP growth to mitigate short-term petroleum price volatility.
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This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.