This study examines the impact of interest and exchange rate volatility on private investment in Tanzania. The role of interest and exchange rates in the economy has been discussed. Interest and exchange rate volatility is known to have a significant effect on key economic variables; but whether it also affects private investment in Tanzania remains a puzzle. The study covers the period of 25 years from 1991 to 2015 and employed the Generalised Method of Moment (GMM) as a method of estimation. The results suggested that the interest rate has no effect on private investment compared to the exchange rate. This remains interesting considering that the interest rate is a key parameter in defining money supply in the economy. The results raised an important view that using a price strategy in monetary policy may not have a significant effect on the private sector; hence, there is a need to engage a pool of stakeholders to accommodate a diverse policy decision.
Exchange rate, interest rate, monetary policy, private investment