This book examines the evolution of the financial sector in Tanzania, the conduct of monetary policy by the Bank of Tanzania, and the determinants of Tanzania’s foreign exchange rate. First, the book details the financial reforms of the early 1990s, which greatly changed the financial system and allowed interest rates and exchange rates to move freely. Second, it investigates whether, during the post-reform period, monetary policy in Tanzania can be characterized by a monetary rule, finding that the Bank of Tanzania appears to have followed a Taylor-type rule, implemented through controlling the growth rate of the monetary base. Finally, the book explores whether the monetary model of exchange rates explains the post-reform movements in the exchange rate, finding considerable support for the model. The book is best suited to central bankers, economic policy makers, and students of monetary economics. It is a good reference to Ph.D. and master’s students in the fields of monetary economics and applied econometrics.