## Financial Liberalization, Money Demand, and Inflation in Uganda

_IMF Working Papers, August 1, 2001_

## Source details

**Canonical URL:** [Financial Liberalization, Money Demand, and Inflation in Uganda](https://www.imf.org/en/publications/wp/issues/2016/12/30/financial-liberalization-money-demand-and-inflation-in-uganda-15356)

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## Bibliographic details
- Authors: Jean-Claude Nachega
- Published: August 1, 2001
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451854084.001

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### Summary
- 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 substantial financial market liberalization 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.
- 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.

### Empirical findings
- Sample period: 1982 to 1998 (quarterly time-series).
- Stability: A stable relationship prevailed among real broad money, income, and domestic and foreign interest rates despite early-1990s liberalization.
- Key econometric conclusions:
  - Income homogeneity.
  - Strong own-rate-of-return effect.
  - High degree of international capital mobility.
  - High degree of asset substitutability.
- Inflation determinants: Both domestic and foreign factors are identified as important determinants of inflation in Uganda.

### Subjects and keywords (as listed)
- Subjects: 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

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/financial-liberalization-money-demand-and-inflation-in-uganda-15356_