MJAMR

Determinants of Exchange Rates in Uganda (1994-2019)

Ewoku Ben, Dr Ariyo Gracious Kazaara, Dr Arinaitwe Julius, Kamugisha Nelson


Abstract

The rate of fluctuation of Exchange rate in Uganda has been on a rise and this prompted research (study) to examine the major determinants of nominal effective Exchange rate and how those factors influence the exchange rates in Uganda. The study focused on four specific objectives namely; inflation, money supply, external debt and exports. To examine the relationship, an OLS method was employed to examine the relationship and influence of variables for the period of 26 years. Some variables such as money supply, external debt and exports were transformed into logarithmic variables to allow normal distribution of error variance and homoscedasticity. The study involved the use of a quantitative research approach using secondary data for the period 1994-2019. Main findings indicate that trade log exports have a negative significant relationship and low on nominal exchange rate, log external debt has a negative insignificant relationship and low influence on nominal exchange rate while log money supply has a positive significant relationship and high influence on nominal exchange rate and inflation has a positive insignificant relationship and also high influence on nominal exchange rate. Several diagnostic tests were conducted to determine the econometric properties of the variables such as Multicollinearity, Autocorrelation, heteroscedasticity, normality and stationarity. Cointegration test were also carried out using ARDL Bound test and it was found out that there is cointegration equation (long-run relationship exists). Exchange rates also may be affected by some other factors that have not been in this research.miu.ac.ug/publications 1091 METROPOLITAN JOURNAL OF BUSINESS & ECONOMICS (MJBE) ISSN 1813-4238 Vol. 2 Issue 4, July - 2023, Pages: 1091-1118 study, so this study recommends that central bank of Uganda should enact policies that regulate the monetary factors (such as inflation, money supply, external debt) to contributes towards gaining value of the Uganda shilling

Keywords

inflation money supply external debt and exports
Metropolitan Journal of Academic Multidisciplinary Research

Cite This Article

Ewoku Ben, Dr Ariyo Gracious Kazaara, Dr Arinaitwe Julius & Kamugisha Nelson (2023). Determinants of Exchange Rates in Uganda (1994-2019). Metropolitan Journal of Academic Multidisciplinary Research, 2(7). https://journals.miu.ac.ug/pages/article.php?article_id=969

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