THE IMPACT OF REAL EXCHANGE RATE VOLATILTY ON ECONOMIC GROWTH: EVIDENCE FROM UGANDA
Date
2020-11-22
Authors
WILLLIAM, SSEMYALO
Journal Title
Journal ISSN
Volume Title
Publisher
Makerere University
Abstract
Thestudyexaminedtheimpactofrealeffectiveexchangeratevolatilityoneconomic
growthinUganda.Thestudyusedquarterlytimeseriesdatafortheperiodof1993to
2015.TheJohansencointegrationandvectorerrorcorrectionmodelwasusedto
determinetheimpactrealexchangeratevolatilityoneconomicgrowthinUganda.The
explanatoryvariablesinthisstudywererealexchangeratevolatility,government
expenditure,labor,exportsandimports.Resultsfrom thestudyrevealedthatreal
effectiveexchangeratevolatility,labor,governmentexpenditureandexportswerefound
tobestatisticallysignificantinexplainingeconomicgrowthofUgandainthelongrun
withallhavingpositiverelationship.Howeverimportswerefoundtohaveanegative
relationshipwitheconomicgrowthinthelongrun.Intheshortrunrealeffective
exchangeratevolatilityandimportshadnegativerelationshipwitheconomicgrowth.
From the regression results study recommends that inorder to spur economic growth
the government should introduce import substitution both in the short run and long run.
The governmentshouldalsointerveneinforeignexchangemarketonlyintheshortrun.
The government should take significant steps to increase the standard of exported
goods to make smooth balance of trade.There should be an increase in government
expenditure inhuman capital because this will spur economic growth in the long run.