Financial Liberalization, Money Demand, and Inflation in Uganda

Jean-Claude Nachega

No 2001/118, IMF Working Papers from International Monetary Fund

Abstract: This paper uses cointegration analysis to investigate the empirical relationship among money, prices, income, and a vector of interest rates in Uganda from 1982 to 1998. Despite the substantial financial market liberalization that has taken place in the early 1990s, quarterly time-series data confirm that a stable relationship prevailed among real broad money, income, and domestic and foreign interest rates. The empirical results indicate income homogeneity, a strong own-rate-of-return effect, a high degree of international capital mobility and asset substitutability, and demonstrate that both domestic and foreign factors are important determinants of inflation in Uganda.

Keywords: WP; money demand; exchange rate; treasury bill; Uganda; inflation; financial liberalization; cointegration; broad money velocity; demand function; exchange rate depreciation; velocity equation; depreciation rate; inflation process; Monetary base; Demand for money; Velocity of money; Interbank rates; Sub-Saharan Africa (search for similar items in EconPapers)
Pages: 45
Date: 2001-08-01
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Citations: View citations in EconPapers (23)

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