Interest rate reforms, financial depth and savings in Tanzania: a dynamic linkage

In this paper, the impact of interest rate reforms on financial deepening and savings in Tanzania is examined using two models, namely the financial deepening model and the savings model. Using cointegration and error-correction techniques, the empirical results of this study reveal that there is abundant support for the positive impact of interest rate reforms on financial deepening in Tanzania. Likewise, the study finds financial deepening, which results from interest rate reforms, to have a positive influence on domestic savings. However, the study failed to find any strong support for the direct positive interest rate elasticity of savings in Tanzania.