The nexus between monetary and fiscal policies and construction output in Tanzania

Abstract

There is insufficient knowledge on the influence of monetary and fiscal policies elements on the construction sector output in Tanzania. Monetary and fiscal policies elements are paramount in decisions pertaining to project viability or feasibility. The purpose of this study is to determine the relationship of monetary and fiscal policies elements with the construction sector output in Tanzania. Accordingly, this study adopts a correlational research design to examine the extant relationship between various elements of fiscal and monetary policies and construction output. Time-series data was obtained from Tanzania National Bureau of Statistics and Bank of Tanzania, covering a period of twenty-three (23) years from 1998 to 2021. The data obtained was tested for stationarity, followed by correlation and regression analysis. Results reveal that construction output is negatively related to commercial bank’s weighted interest and inflation rates. On the other hand, construction output is positively related to exchange rate, government expenditure on construction, and total tax on product. Multiple regression analysis revealed similar results, with the exception of exchange rate which has turned out to be negatively related to construction output. Nevertheless, the relationship of construction output and all elements of monetary and fiscal policies is not statistically significant. The study provides knowledge on the nexus between monetary and fiscal policies on the construction sector output within a previously unexplored Tanzanian context. This can help developers make informed decisions on investments in times of high or low inflation and interest rates, and during an upsurge of exchange rates. It also informs the public on how the government regulates the construction output by increasing or decreasing expenditure on construction.