The Influence of Exchange Rate Unpredictability and Trade Balance on Tanzania’s Economic Performance
DOI:
https://doi.org/10.59645/abr.v17i1.216Keywords:
Exchange Rate Volatility, Trade Balance, Economic Performance, GDP Growth, Inflation, Foreign Direct InvestmentAbstract
Understanding Tanzania's economic performance requires an analysis of trade balance dynamics and exchange rate fluctuations. The country's efforts to stabilize the Tanzania shilling through Bank of Tanzania interventions and monetary policy adjustments are aimed at promoting a positive balance of trade, which is critical in reducing dependence on foreign aid and improving economic stability. This study focuses on exchange rate unpredictability from 2014 to 2023, examines its impact on trade balance, inflation and macroeconomic performance. The study used a quantitative research approach and a longitudinal research design using descriptive statistics, correlation analysis and multiple regression models with the assistant of IBM SPSS Statistics 26. The results show that exchange rate volatility has a significant negative effect on GDP growth, with a correlation of -0.483 and a beta coefficient of -0.460. A strong positive correlation of 0.902 between exchange rate fluctuations and trade balance. The study underscores the critical need for stabilizing the Tanzanian shilling to foster economic stability and sustainable growth. The study recommended that policymakers maintain sufficient foreign exchange reserves to stabilize the exchange rate and mitigate its negative impact on the trade balance and macroeconomic performance.
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