Financial Liberalization, Money Demand, and Inflation in Uganda
August 1, 2001
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Summary
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.
Subject: Demand for money, Financial services, Inflation, Interbank rates, Monetary base, Money, Prices, Velocity of money
Keywords: broad money velocity, cointegration, Demand for money, demand function, depreciation rate, exchange rate, exchange rate depreciation, financial liberalization, inflation, inflation process, Interbank rates, Monetary base, money demand, Sub-Saharan Africa, treasury bill, Uganda, velocity equation, Velocity of money, WP
Pages:
45
Volume:
2001
DOI:
Issue:
118
Series:
Working Paper No. 2001/118
Stock No:
WPIEA1182001
ISBN:
9781451854084
ISSN:
1018-5941
