Exchange Rate Pass-Through to Domestic Prices in Uganda: Evidence from a Structural Vector Auto-Regression (SVAR)

Thomas Bwire, Francis L. Anguyo and Jacob Opolot

Journal of Statistical and Econometric Methods, 2013, vol. 2, issue 4, 3

Abstract: This paper examines the degree of exchange rate pass through to inflation in Uganda with quarterly data over the period 1999Q3 to 2012Q2 using a triangulation of well specified Vector Error Correction (VEC) and Structural Vector Auto-Regression (SVAR) models. The findings show strong and significant association between the exchange rate movements and inflation in Uganda, and that the pass-through to domestic inflation, although incomplete, is modest and persistent with a dynamic exchange rate pass-through elasticity of 0.48. This suggests that exchange rate movements remain a potentially important source of inflation in Uganda. Using variance decomposition, it is found that exchange rate shocks have a modest contribution to inflation variance, although inflation is mainly driven by own shocks especially at shorter horizons. The policy implication arising from these findings is that the monetary authority must be vigilant at exchange rate movements and focus on exchange rate interventions which stem inflation pressure from the external sector.

Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.scienpress.com/Upload/JSEM%2fVol%202_4_3.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spt:stecon:v:2:y:2013:i:4:f:2_4_3

Access Statistics for this article

More articles in Journal of Statistical and Econometric Methods from SCIENPRESS Ltd
Bibliographic data for series maintained by Eleftherios Spyromitros-Xioufis ().