Many money demand studies have been carried out on Uganda, however, these studies perceive and incorporate exchange rate as a linear determinant of real money demand. Indeed, exchange rate may have asymmetric effects on real money demand; with exchange rate appreciation having different effects from exchange rate depreciation. Therefore, this is the first study to estimate exchange rate asymmetries in Uganda, for the period 2008Q3 and 2018Q4. The study uses both the linear ARDL and non-linear ARDL methodologies to accomplish its goal. This is also done by incorporating an economic uncertainty index, which is critical, especially in light of the novel global coronavirus pandemic, that has disrupted trade, movement and supply chains. The error correction terms of both models are negative and significant, with the one of the non-linear ARDL twice as much as that of the linear ARDL. Indeed, the study confirms the existence of exchange rate asymmetries on Uganda’s real money demand. In the linear ARDL model, exchange rate has a positive effect in the long run but a negative result in the short run. On one hand, the non-linear ARDL model reveals that an exchange rate depreciation of the Uganda Shillings negatively affects real money demand in the short run. On the other hand, an exchange rate appreciation positively effects real money demand. Notably, economic uncertainty has insignificant effects in both models, except for its lags in the non-linear model. The implication of these findings is that macro-economic policy management in Uganda should be cognizant of these asymmetric effects of exchange rate, for effective planning, policy and implementation.

Does uncertainty necessarily change the way in which fiscal policy affects output growth in Uganda? We provide an empirical response to this fundamental question using the latest datasets and a rigorous econometric practice. Fiscal policy is often manipulated in many countries as one of the means to provide counter-cyclical stimulus over the cycle of uncertainties. Indeed, fiscal policy operations frequently vary with uncertainty sequence and this introduces bidirectional interactions between fiscal policy, uncertainty and output growth. Using the Autoregressive Distributed Lag Model, we show that tax revenue and expenditure are the most affected fiscal policy measures in the presence of uncertainty, while borrowing is the least affected both in the short and long-run. Therefore, unless government macroeconomic frameworks fully incorporate economic uncertainties into projections, the fragility of rising global and domestic uncertainty is bound to cause large and significant divergencies between the anticipated and the actual growth outturn. We therefore recommend the need to use borrowing avenue in the most optimal means to stimulate and sustain growth. While tax revenues have proved to spur growth both in the short and the long-run, the impact is bound to shrink in the face of uncertainty.