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The Effects Of Exchange Rate Variability On Exports: Evidence From Uganda (1988 – 2001)

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Author Info
David Kihangire (Phd)

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Abstract

Using monthly data, this study investigates the effects of exchange rate variability on Uganda’s aggregate export growth under the floating exchange rate policy regime (1994-2001), benchmarked on the fixed exchange rate regime (1988-1993). The main research question it posits is: “What is the effect of exchange rate variability on Uganda’s exports?” Premised on risk-aversion, the study tests the main hypothesis that ‘Uganda’s exports are negatively and significantly correlated with exchange rate variability.’ Due to lack of pure I(0) or I(1) for all the series, and absence of endogeneity and simultaneous bias problems between export supply and export demand, the ARDL approach to cointegration and OLS are applied in the study. The results suggest support for the research hypothesis. The policy implication is that intervention targeting the minimisation of excessive volatility in the real effective exchange rate under the floating regime may contribute to supporting export sector growth, economic growth, and overall external macroeconomic stability in Uganda.

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Paper provided by EconWPA in its series International Trade with number 0505013.

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Length: 40 pages
Date of creation: 21 May 2005
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Handle: RePEc:wpa:wuwpit:0505013

Note: Type of Document - doc; pages: 40. The study was part of my Ph.D. research study at the University of Bradford.
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Related research
Keywords: Uganda; Exports; Exchange Rate Variability;

Find related papers by JEL classification:
F1 - International Economics - - Trade
F2 - International Economics - - International Factor Movements and International Business

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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  23. McKenzie, Michael D, 1999. " The Impact of Exchange Rate Volatility on International Trade Flows," Journal of Economic Surveys, Blackwell Publishing, vol. 13(1), pages 71-106, February. [Downloadable!] (restricted)
  24. Bahmani-Oskooee, Mohsen & Ltaifa, Nabil, 1992. "Effects of exchange rate risk on exports: crosscountry analysis," World Development, Elsevier, vol. 20(8), pages 1173-1181, August. [Downloadable!] (restricted)
  25. Chowdhury, Abdur R, 1993. "Does Exchange Rate Volatility Depress Trade Flows? Evidence from Error-Correction Models," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 700-706, November. [Downloadable!] (restricted)
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