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ItemDeterminants of exchange rate volatility in Uganda(Makerere University, 2025)This study examined the determinants of exchange rate volatility in Uganda using monthly data spanning the period January 2000 to June 2025. Employing the Autoregressive Conditional Heteroskedasticity (ARCH) family model with multiplicative heteroskedasticity, the study analyzed both the mean and variance equations to capture the dynamic behavior of the Ugandan shilling against the U.S. dollar. The results from the mean equation revealed that interest rates exert a statistically significant negative effect on the exchange rate, implying that a 1% increase in interest rates leads to an approximate 0.13% appreciation of the Ugandan shilling. This finding underscores the critical role of monetary policy in influencing exchange rate movements in Uganda. In the variance equation, the results demonstrated that inflation and the trade balance significantly reduce exchange rate volatility. Specifically, higher inflation rates were associated with lower levels of volatility, suggesting that price stability contributes to currency stability when supported by consistent policy frameworks. Similarly, an improved trade balance was found to stabilize the exchange rate by reducing external sector imbalances. The ARCH component indicated that recent exchange rate shocks have a strong and immediate effect on current volatility, while the GARCH term showed that such volatility tends to dissipate relatively quickly thus short lived nature of market disturbances. The findings overall suggest that Uganda’s exchange rate dynamics are largely influenced by interest rate policy, inflation management, and trade performance. Several policy implications emerge. The Bank of Uganda should strengthen its monetary policy stance through strategic interest rate adjustments to mitigate exchange rate fluctuations during periods of depreciation pressure. The government should also sustain price stability by maintaining credible inflation targeting frameworks, stabilizing food and fuel prices, and controlling cost-push inflation sources. Enhancing the trade balance through export promotion, diversification into high-value sectors, and investment in trade infrastructure can further stabilize the currency. Finally, coordination between fiscal and monetary policies is critical to ensure policy consistency, promote macroeconomic stability, and prevent conflicting outcomes.
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ItemImpact of monetary policy on the economic growth of Uganda(Makerere University, 2025)Monetary policy tools such as interest rates and money supply play a vital role in maintaining economic stability and promoting growth. This study examines the impact of monetary policy on economic growth in Uganda, focusing on the period from 1993 to 2023. The specific objectives of the study were: (i) to investigate the trend of monetary policy and economic growth during the study period, (ii) to examine the long-run impact of interest rate changes on Uganda's economic growth, and (iii) to analyze the short-run impact of money supply on economic growth. Data for the study were obtained from the Bank of Uganda and the World Bank. The research applied three levels of analysis: univariate, bivariate, and multivariate. Univariate analysis involved descriptive statistics to summarize key variables, while bivariate analysis used Pearson correlation to evaluate the relationships between pairs of variables, including GDP, interest rates, and money supply. At the multivariate level, the study employed the Augmented Dickey-Fuller and Phillips-Perron tests to ensure the stationarity of the time series data. Johansen cointegration tests were conducted to identify long-term equilibrium relationships, and Granger causality tests explored causal links between monetary policy and economic growth. The Autoregressive Distributive Lag model was then used to analyze both long-run and short-run dynamics. Descriptive statistics showed that GDP growth and money supply were near-symmetrically distributed, but GDP growth deviated from normality, requiring robust analytical methods. Pairwise correlations revealed a strong positive link between money supply and GDP growth, while the relationship with interest rates was weak and negative. Stationarity tests confirmed non-stationarity, necessitating advanced models like ARDL, which found money supply to have a significant long-term positive impact on GDP growth. Cointegration analysis showed no evidence of a long-run equilibrium among the variables, emphasizing short-term dynamics. Granger causality indicated a mutual influence between GDP growth and money supply, with interest rates playing a limited role. Overall, the study concluded that money supply is a critical driver of GDP growth, while interest rates had minimal influence, suggesting monetary policy should prioritize money supply management to stimulate economic growth.
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ItemThe impact of informal sector taxation on domestic revenue mobilization in Uganda: a case study of Kikuubo business area in Kampala(Makerere University, 2025)Uganda’s informal sector constitutes more than three-quarters of national economic activity, yet contributes minimally to domestic revenue. This study examines how informal sector taxation influences domestic revenue mobilization in Uganda, using Kikuubo Business Area in Kampala as a micro-level case study. A mixed-methods design was employed, combining primary data from 200 informal traders with secondary macroeconomic data from URA, UBOS, IMF, and World Bank covering 2000–2024. Logistic and Probit models were used to estimate determinants of tax compliance at the trader level, while Heteroskedasticity and Autocorrelation Consistent (HAC-OLS) and Two-Stage Least Squares (2SLS) models assessed the impact of informality, enforcement, digitalization, and formalization on Uganda’s tax-to-GDP ratio. Results show that trader compliance averages 54% and is significantly influenced by awareness, perceived fairness, tax morale, EFRIS usage, formal registration, and turnover. Digital adoption increases the likelihood of compliance more than twofold, while fairness and awareness play critical behavioral roles. At the macro level, enforcement intensity, formality rates, and digitalization positively and significantly improve tax performance, whereas the informal sector’s size exerts a strong negative effect. The 2SLS results confirm that enforcement has a causal impact on revenue mobilization when supported by institutional capacity. Scenario simulations demonstrate that increasing awareness, fairness perception, digital adoption, and formalization could raise compliance to 73%, generating approximately UGX 0.1 trillion in additional annual revenue and increasing the tax-to-GDP ratio by 0.01 percentage points. The study concludes that sustainable revenue mobilization requires a balanced approach, strengthening enforcement, enhancing institutional capacity, improving digital inclusion, and building taxpayer trust. It recommends reforms in presumptive taxation, continuous taxpayer education, transparent service delivery, digital training, and harmonized enforcement across local and national authorities. These measures would significantly improve compliance, broaden the tax base, and enhance Uganda’s fiscal sustainability.
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ItemEffect of government borrowing on economic growth in Uganda(Makerere University, 2026)The nexus between public debt accumulation and economic growth remains pivotal yet a contentious issue within development economics, particularly for low-income countries navigating the dual imperatives of infrastructure-led development and fiscal sustainability. For nations like Uganda, where post-HIPC debt relief was replaced by a renewed and rapid accumulation of public debt to finance ambitious national development agendas, understanding the precise growth implications of this fiscal strategy is not merely an academic exercise but a matter of urgent macroeconomic policy. Escalating debt-to-GDP ratios and the associated rise in debt servicing costs threaten to compress fiscal space, crowd out productive investment, and potentially undermine the long-term growth prospects they intended to secure. This study, therefore addresses a critical empirical gap by providing a contemporary, rigorous analysis of how Uganda’s specific debt trajectory shaped by strategic borrowing for Vision 2040 projects has influenced its economic growth from the post-relief era through to the present decade. The primary aim of this research is to empirically examine the effect of government borrowing on Uganda’s economic growth alongside other macroeconomic variables, distinguishing between short-run dynamics and long-run equilibrium relationships over the period 1994–2020. Moving beyond simple linear correlations, the study investigates the broader macroeconomic conditions in mediating the debt-growth relationship. This investigation is vital for policymakers at the Ministry of Finance, Planning and Economic Development and the Bank of Uganda, as it provides an evidence-based foundation for calibrating debt sustainability frameworks, optimizing the composition of public expenditure, and ensuring that borrowing genuinely catalyzes development rather than precipitating a costly debt overhang. Methodologically, the study employs an Auto-Regressive Distributed Lag (ARDL) bounds testing approach to cointegration, a robust technique suitable for analysing time-series data with a mix of stationary and non-stationary variables. Utilizing annual secondary data from the World Bank and Ugandan national sources, the model specifies economic growth (real GDP growth rate) as a function of total debt service, inflation, gross fixed capital formation, general government final consumption expenditure, and trade openness. Pre-and post-estimation diagnostics, including Variance Inflation Factor (VIF), Breusch-Pagan, and Jarque-Bera tests, confirm the model’s validity, ensuring the reliability of inferences drawn. The most salient finding is the statistically significant negative long-run impact of general government final consumption expenditure on economic growth. This result provides empirical validation for neoclassical and debt overhang theories, suggesting that borrowed funds channelled into recurrent, consumptive spending crowd out productive private investment and fail to enhance the economy’s productive capacity, thereby imposing a future growth penalty. Conversely, trade openness exhibits a positive and significant short-run effect on growth, highlighting the role of external sector vitality. While the direct coefficient on total debt service in the long-run ARDL model is marginally significant and negative, the more critical mechanism is captured indirectly through the negative effect of government consumption. The Error Correction Term (ECT) of -0.421 is highly significant, indicating a moderate speed of adjustment approximately 42.1% of any disequilibrium caused by external shocks is corrected within one year as the economy reverts to its long-run growth path. The main takeaway from this study is that for Uganda, the composition and productivity of public expenditure financed by debt are more consequential for growth than the sheer volume of borrowing itself. The empirical evidence challenges the assumption that debt-financed public spending is inherently growth enhancing. Instead, it reveals that when borrowing primarily funds recurrent consumption, it acts as a drag on long-term prosperity, validating concerns of a latent burden of debt.
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ItemThe effect of warehouse receipt system on cashew nuts production in Tanzania(Makerere University, 2026)This study analyzed the effect of warehouse receipt system on cashew nuts production in Tanzania. The study used secondary time series data obtained from UNdata of the United Nations for model one and cross-sectional data was obtained from survey data of 2007/2008 agricultural survey conducted in Tanzania at village level for model two. Specific objectives were to analyze the effect of warehouse-regulated prices on cashew nuts production in Tanzania and to assess the effect of input accessibility under WRS on cashew nuts productivity in Tanzania. Logarithms of the variables were taken in order to determine the percentage rate of change in the dependent variable when one of the independent variables changes. The Autoregressive Distributed Lag (ARDL) model was used for objective one, and two models were estimated. But the second objective was analyzed using Ordinary Least Squares (OLS) technique. Prior to the econometric estimation, the study data was subjected to preliminary analysis, which involved presentation of descriptive statistics and normality, heteroscedasticity and serial correlation tests. The ARDL results from the estimation reveal that, cashew nut prices, pesticides, cultivated area and their lagged values were the main significant factors affecting cashew nut production in Tanzania. Likewise, for objective two, fertilizer use, pesticides, herbicides, education of head of household, radio, cellphone, bicycle, and motorcycle ownership positively influenced the cashew nut productivity. While labor force had no significant effect on cashew nuts production, holding other factors constant. Based on the findings of the study, the conclusion is that warehouse-regulated prices positively affect cashew nuts production in Tanzania. Secondly, input accessibility under WRS positively affects cashew nuts productivity in Tanzania. This study recommends that the Tanzanian government should intervene in the cashew nuts sub-sector and provide subsidized inputs for the small farmers to reduce on the costs. Cheap funds should be availed to farmers to enable them pay for other key factors such as labor on their farms. Government should also encourage farmer cooperatives that may be engaged in processing of the crop before export