1,720,965 research outputs found
Intersecting Dynamics: The Influence of Macroeconomic Factors and Financial Development on Interest Rate Spreads in Uganda
Get PDFThe study investigates the factors influencing interest rate spreads in Uganda's banking sector, focusing on inflation, GDP, Real Effective Exchange Rate (REER), private sector credit, and financial development. Using an Autoregressive Distributed Lag (ARDL) model on data from 2001 to 2022, it examines short and long-term dynamics between these variables and interest rate spreads, within the liquidity preference theory framework. In the short run, inflation and GDP have marginally significant positive impacts on interest rate spreads, indicating that initial increases may widen spreads due to heightened liquidity demand and economic activity. Conversely, in the long run, these factors exhibit significant negative effects, suggesting a stabilizing influence of monetary policy and increased market efficiency. The REER's short-term impact reflects currency value fluctuations affecting risk premium adjustments, which diminish in the long run as markets adapt. The study also explores the interaction between inflation and financial development, represented by private sector credit, on interest rate spreads. Short-term results show a non-significant negative moderation by financial development, while long-term analysis suggests a potential amplification of inflation's effects as the financial sector matures, requiring nuanced financial development policies. Policy recommendations stress the importance of stabilizing inflation and exchange rates to control interest rate spreads in the short term. Long-term strategies include enhancing banking sector efficiency and promoting competitive practices to mitigate the negative effects of economic growth on interest rate spreads
Understanding the Dynamics Between Monetary Policy and Interest Rate Spreads in Uganda: A Quantitative Study
Get PDFThis study delves into the intricate relationship between monetary policy variables and interest rate spreads in Uganda's financial sector. It examines the impact of the rediscount rate, inflation, money supply, and the Real Effective Exchange Rate on interest rate spreads. Findings indicate that while short-term changes in the rediscount rate have a limited effect on interest rate spreads, higher rates widen spreads in the long term as banks adjust strategically. Initially, inflation narrows spreads, but persistent high inflation widens them over time as banks hedge against inflation risk. Moreover, an increase in money supply reduces spreads in the short run but has diminishing effects over time. Recommendations include transparent adjustments of the rediscount rate, robust inflation targeting frameworks, and vigilant monitoring of the money supply to support economic growth and financial stability. Overall, this study provides insights for policymakers and financial institutions, emphasizing the importance of considering both short-term and long-term effects in monetary policy adjustments for Uganda's economic stability
Macroeconomic Dynamics in Uganda: Investigating the Relationships among GDP Growth, Gross Capital Formation, Population Growth and FDI
Get PDFThis paper sought to investigate Uganda's macroeconomic dynamics, informed by the objective of studying relationships among GDP growth, Gross Capital Formation (GCF), population growth, and net inflows of Foreign Direct Investment (FDI) by applying the endogenous growth theory. These key variables include GDP growth, GCF, population growth, and FDI net inflows; secondary data from national databases and international organizations were collected from 2000 to 2022. In this regard, the study follows a quantitative approach by adopting a descriptive and econometric design to investigate the relationship among the aforementioned variables. The methodological tools were Descriptive statistics, stationarity tests, multicollinearity testing, cointegration testing, and ARDL model estimation. These range from relative stability in GDP growth to the highly volatile GCF growth and smooth population growth trends to negative net inflows indicated by FDI. This confirms the long-run cointegration between the variables, whereby GCF proves to be firmly and positively related to GDP through an ARDL model. In contrast, variables FDI and population growth become influential after due lags. The results show that Uganda needs domestic and foreign investment to maintain economic growth; however, it has to deal with disinvestment challenges and an increasing population for long-term stability. This study finds that capital formation and foreign investment are integral to the Ugandan economy and can, if managed appropriately, ensure continued growth by overcoming these challenges in demography and investment
Human Capital, Fixed Capital Formation and Economic Growth: An Empirical Analysis of Endogenous Growth Drivers in Uganda
Get PDFThis research aimed to look at the effect of key endogenous variables such as GNI, Human Capital, FDI, Inflation, and GCF, which have impacted the economic growth in Uganda. This study adopted a time-series research design. Data from the study were obtained through secondary sources, including government publications, international financial databases, and reports obtained from UBOS. The econometric methods the study adopted included the ADF test for stationarity, the VIF test for multicollinearity, and the ARDL model in testing both the short-run and long-run relationships. The study found that in the long run, human capital, GCF, and inflation significantly contributed to economic growth at favorable rates, while FDI negatively influenced economic growth. In the short run, GNI, Human Capital, FDI, and Capital are significant determinants of economic growth, with an adverse short-run effect for GNI and FDI. The results emphasize that capital formation and human capital development are important for sustainable economic growth in Uganda. The study concludes that different aspects of fashion affect Uganda's economic performance, indicating the need to stabilize major macroeconomic indicators to achieve long-term growth, focusing on human capital, capital formation, and managing inflation
Macro-Financial Determinants of Electricity Power Loss in Uganda
Get PDFThis study examined the macro-financial determinants of electricity power loss in Uganda, with objectives that looked at GDP per capita, inflation, lending rates, the real effective exchange rate, and energy investment in electricity power loss. This study adopted a time series quantitative methodology. The secondary data was collected from reliable sources such as the World Bank, the Bank of Uganda, and the Electricity Regulatory Authority, spanning 20 years. The research applied a VAR model to analyze the short-run dynamics of the variables under consideration. The data were first cleaned to handle heteroscedasticity issues and missing values. The study found some of Uganda's most significant determinants of electricity losses to be macro-financial factors such as inflation, GDP per capita differences, and energy investment. Inflation volatility increased power losses, as did differences in GDP per capita, while low investment in energy translated to inefficiency within the electricity sector. Lending rates inhibited the infrastructural development of energy and, hence, power distribution and transmission efficiency. Therefore, the study concludes that addressing these macro-financial factors- inflation control, efficient energy investment, and economic policies- minimizes losses of electricity power in Uganda. This study suggests focusing on inflation stabilization, attracting investment in the energy sector, controlling the lending rate, and upgrading energy infrastructure management for better efficiency in the overall Ugandan electricity system. In addition, addressing issues of exchange rates and modern energy distribution technologies is central to minimizing losses and promoting an efficient energy sector
Monetary Policy and Uganda’s Private Investment
Get PDFMonetary policy determines the overall performance of an economy, particularly in developing countries where private investment is among the determinants of growth. Money supply, inflation, and changes in lending rates always influenced how the private sector invested in Uganda. This study aimed to examine how monetary policy influences private investment in Uganda focusing on money supply, interest rates, and inflation as the key determinants. Data for the period 1990 to 2020 were used for the study, which were secondary time series data provided by the Bank of Uganda and World Development Indicators publications. The Autoregressive Distributed Lag (ARDL) model was used to apply its application to both the short-run and long-run effects of monetary policy on private investment. The results showed that in the short run, private investment responded positively to increased money supply and inflation and negatively to higher lending rates. Although monetary policy can stimulate private investment in the short run, its effectiveness wanes in the long run unless carefully managed. This means that expansive policies can stimulate investment in the short run, but such heavy reliance could undermine the sustainability of investment. The study identifies that if Uganda could maintain an effective monetary policy, it is vital to balance encouraging private investment and maintaining macroeconomic stability. Such findings can assist in designing policies fostering sustainable private sector-driven growth
Does Investment in Human Capital Offset Oil Dependence? Unveiling the Drivers of Unemployment in Uganda
Get PDFThis study explored the impact of human capital development on unemployment in Uganda. Employing a Vector Auto Regression (VAR) model informed by the Neoclassical growth theory, the research analyzed the relationship between education expenditure (a human capital component) and unemployment, while controlling for physical capital (represented by GDP) and inflation. Utilizing annual data from 1986 to 2022, the findings revealed a complex dynamic. In the short run, higher real effective exchange rates (stronger local currency) and GDP growth might lead to a temporary rise in unemployment. However, the long-term picture suggests a positive influence of real exchange rates and GDP on unemployment, implying they contribute to lower unemployment over time. Interestingly, the study found no direct impact of international oil prices on Uganda's unemployment. The research concludes by highlighting the need for effective population management strategies, such as family planning and education, to ensure sustainable population growth that aligns with economic expansion
Fiscal Policy Variables and Industrial Growth in Uganda
No full textThis study examines the effect of government spending, taxation, and borrowing on the development of Uganda's manufacturing sector in both the short and long term based on the ARDL model. The study was focused on three main objectives: examining the role of government consumption expenditure, the effect of value-added tax (VAT), and the role of short-term debt on manufacturing value-added (MVA). The results show that government spending contributes slightly to MVA in the short term but supports growth in the long term. VAT contributes to MVA in the short term but reduces it in the long term, showing how excessive taxation can damage industrial competitiveness. Short-term debt reduces the growth of MVA in the short term but is positive in the long term, showing the need for careful management of debt. In general, the evidence suggests that firm government support, moderate taxation, and prudent borrowing are central to the development of Uganda's manufacturing. However, the study identifies a number of limitations, such as the reliance on secondary data, exclusion of possible determinants, and failure to fully establish causality. It recommends that future research take into account a wider range of variables and more disaggregated data in an effort to shed more light on the determinants of manufacturing growth
Factor Input Prices and Unemployment in Uganda
Get PDFExamining the impact of input costs on unemployment in Uganda, this study employed an ARDL model based on the Efficiency Wage Theory. Analyzing annual data from 1987 to 2019 and controlling for economic size and currency value, the research found that lending interest rates, real exchange rates, and GDP have a short-term negative impact on unemployment, suggesting an initial rise. However, the study highlights a positive long-run relationship between these factors and unemployment, indicating their potential to contribute to lower unemployment over time. Interestingly, no significant short-run or long-run effect of global crude oil prices on Uganda's unemployment was identified. These findings suggest that while central bank policies promoting lower interest rates can encourage short-term investment and potentially lower unemployment, long-term economic growth is also crucial. Furthermore, the lack of impact from oil prices underscores the need for Ugandan policymakers to diversify the economy beyond oil dependence for sustainable unemployment reduction
REER, Inflation, Interest Rate and Uganda’s Coffee Exportation
Get PDFThis study examines the effect of the REER (real effective exchange rate) known as the relative currency value, inflation, and interest rate on the exportation of coffee in Uganda. To achieve the study's objectives, the study employed an Auto Regressive Distributive Lag Model using annual data from 1990-2019. It was discovered to have a beneficial effect on coffee export volumes in the long run when the relative currency value appreciates, while short-run appreciation of the effective currency rate has a negative effect that carries over to a three-year period. An increase in the rate of inflation has a positive effect on coffee exports in the two-year short run, but in the longer term, an increase in the inflation rate has a negative effect. An increase in the lending rate has a negative effect on coffee exports in the two-year short term as well as in the first and third year, but in the long run, the effect is positive. The coffee production capacity of Uganda was captured by the estimated model through the incorporation of a variable on the volume of coffee production that was found to have a positive effect in both the short and long run periods. The study observes that the responsiveness of the volume of coffee exports to the responsiveness of IVs is low, an indicator that Ugandan coffee exports are facing inelastic demand on the global market. The study thus recommends that the government seize this golden chance with its hands by making cheap capital available to farmers, processors, and exporters, issuing more export licenses and encouraging more households to produce more coffee
- …
