Advanced Research in Economics and Business Strategy Journal
Volume 6, Numéro 1, Pages 200-214
2025-06-30
Denominational Inflation: Limited Currency Divisibility In Cash Payment Systems – Tanzania As A Case Study
Authors : Nyonzo Francis .
Abstract
This study investigates how the limited divisibility of money affects price setting and inflation in Tanzania, a country with a reliance on cash transactions. Through analyzing bus fares and prices listed in both domestic and international online shopping platforms, the research highlights the economic implications of rounding prices to the nearest available currency denomination due to the absence of small denominations. The analysis reveals that ordinary bus users pay more due to price rounding to the nearest available denominations. Digital payment systems on the other hand, reduces the need for adjustments that inflate costs. The study employed logistic regression to show the relationship of the last digit of the price in the two different shopping malls. The findings call for the promotion of digital payment systems to enhance monetary policy effectiveness, reduce transaction costs, and ensure price accuracy, thereby proposing policy directions for Tanzania to transition from cash-based to digital payment methods.
Keywords
Denominational Inflation ; Payment Systems ; Currency ; Inflation ; Monetary Policy
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