Evidence on the Demand for Money Function in Uganda

Kararach, George

doi:10.2139/ssrn.379880

Cited by 9 publications

(9 citation statements)

References 39 publications

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“…In contrast to the findings above, some studies indicate the instability of money demand in transition and developing countries. For example, Kararach (2002) found no evidence of a stable money demand in Uganda, and Dekle and Pradhan (1997) found money demand to be unstable in Asian countries. Tahir (1995) attributed instability of money demand functions to financial innovation leading to fundamental change in-and possibly the instability of-money demand.…”

Section: Literature Reviewmentioning

confidence: 99%

Determination of Long and Short Run Demand for Money in the West African Monetary Zone (WAMZ) Countries: A Panel Analysis

Adi

Riti

2018

ERFIN

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The paper examines demand for real money balances in six West Africa countries, over the 1985-2014 periods using panel Cointegration technique. The result shows that long run money demand is positively related to real income, inflation rate and inversely related to interest rate spread, real effective exchange rate and US real interest rate. Long run income elasticity is greater than unity and less than unity in short run. All variables are significant except effective exchange rate, thus; both currency substitution and capital mobility hypotheses hold in the long run while capital mobility holds only in the short run. We recommend that monetary aggregate should growth slower than economic growth to maintain price stability, countries should try to maintained stable exchange rate and ensured market driven interest rate policy. Keyword: Demand for Money; Interest Rate Spread; Capital Mobility and Currency Substitution, Panel Analysis.JEL CODE: E41, E52, C33, O11.

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Section: Literature Reviewmentioning

confidence: 99%

Determination of Long and Short Run Demand for Money in the West African Monetary Zone (WAMZ) Countries: A Panel Analysis

Adi

Riti

2018

ERFIN

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“…While studies based on industrialised countries, such as Lippi and Secchi (), Attanasio et al (), Arrau and De Gregorio () and Alvarez and Lippi () have found financial innovation to have had an impact on money demand, few have analysed this relationship in developing countries. Kararach (), Ndirangu and Nyamongo (), and Augustina et al () provide useful case studies. This is despite the fact that Sub‐Saharan Africa has seen considerable financial innovation, particularly during the last decade.…”

Section: Introductionmentioning

confidence: 99%

Financial Innovation and Money Demand: Evidence from Sub‐Saharan Africa

Dunne¹,

Kasekende

2018

South African J Economics

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While the effect of financial innovation on money demand has been widely researched in industrialised countries, because of its major role in monetary policy, few studies have focused on developing countries. This is surprising given the considerable growth in financial innovation in Sub‐Saharan Africa in recent years and its potential implications for developing country macroeconomic policy. This paper investigates the development of financial innovation and its impact on money demand in the region using panel data estimation techniques for 34 countries between 1980 and 2013. The results indicate that there is a negative relationship between financial innovation and money demand. This implies that financial innovation plays a crucial role in explaining money demand in Sub‐Saharan Africa and given innovations such as mobile money in the region this can have important implications for future policy design.

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“…Most money demand studies in Uganda include exchange rate as a major determinant of money demand (Kayongo & Guloba, 2018;Guloba & Osoro, 2009;Nyorekwa, 2007;Kararach, 2002;Katarikawe & Sebudde, 1999;Atingi-Ego & Matthews, 1996;Kateregga, 1993) among others, while others don't (Nachega, 2001). The studies that include exchange rate as a money determinant either confirm wealth effects or expectation effects of exchange rate effects on money demand.…”

Section: Literature Reviewmentioning

confidence: 98%

“…The studies that include exchange rate as a money determinant either confirm wealth effects or expectation effects of exchange rate effects on money demand. For example, (Opolot, 2007;Nabiddo, 2007) found out that economic agents reduce their demand for Uganda Shillings whenever there is an exchange rate depreciation while Kararach (2002) found out that economic agents increase their demand for Uganda Shillings in the presence of an exchange rate depreciation. Other studies show that exchange rate can either have wealth effects or speculation effects on money demand, depending on the monetary aggregate analysed.…”

Section: Literature Reviewmentioning

confidence: 99%

Asymmetric Effects of Exchange Rate on Monetary Policy in Emerging Countries: A Non-Linear ARDL Approach in Uganda

Kayongo¹,

Guloba

Muvawala³

2020

AEF

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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.

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Evidence on the Demand for Money Function in Uganda

Cited by 9 publications

References 39 publications

Determination of Long and Short Run Demand for Money in the West African Monetary Zone (WAMZ) Countries: A Panel Analysis

Determination of Long and Short Run Demand for Money in the West African Monetary Zone (WAMZ) Countries: A Panel Analysis

Financial Innovation and Money Demand: Evidence from Sub‐Saharan Africa

Asymmetric Effects of Exchange Rate on Monetary Policy in Emerging Countries: A Non-Linear ARDL Approach in Uganda

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