Fiscal policy consistency and its implications for macroeconomic aggregates: The case of Uganda
The relationship between growth in monetary aggregates and price changes continues to be a subject of considerable debate both in the academic and policy circles. Whereas the more ‘conservative’ policy makers hold that growth in monetary aggregates bear proportionately on prices, ‘liberals’ on the other hand suggest a fairly weak relationship and instead mainly attribute sustained price changes to other innovations (including structural weaknesses and poor productive capacity). This study employed vector autoregression techniques (and its variants) to examine both short term as well as long term interactions between selected macroeconomic aggregates with particular focus on the relationship between money growth and price changes. Results from both the reduced form vector autoregression specification and the contemporaneous structural vector autoregression show a weak causation from growth in monetary aggregates to price changes, but the link between changes in monetary aggregates and prices becomes stronger in the long run. The results also point to a strong relationship between price changes on the one hand and exchange rate depreciation, and past inflation outcomes on the other. The results imply a potential for increased revenue from monetisation, at least up to some feasible as well as the need to focus on other possible sources of price variations. In general, whereas it is possible for the relationship between prices and money to weaken, budget deficits beyond ‘certain financeable limits’ will clearly negate the possibility of attaining other objectives of macroeconomic policy...
|Date of creation:||Jun 2010|
|Date of revision:|
|Contact details of provider:|| Postal: 51 Pool Road, Makerere University Campus, P.O.Box 7841 Kampala|
Web page: http://www.eprc.or.ug
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Christopher, Adam, 2009. "The conduct of monetary policy in Uganda: an assessment," Research Series 101712, Economic Policy Research Centre (EPRC).
- Corbo, Vittorio & Schmidt-Hebbel, Klaus, 1991.
"Public policies and saving in developing countries,"
Policy Research Working Paper Series
574, The World Bank.
- Corbo, Vittorio & Schmidt-Hebbel, Klaus, 1991. "Public policies and saving in developing countries," Journal of Development Economics, Elsevier, vol. 36(1), pages 89-115, July.
- Buffie, Edward & Adam, Christopher & O'Connell, Stephen & Pattillo, Catherine, 2008.
"Riding the wave: Monetary responses to aid surges in low-income countries,"
European Economic Review,
Elsevier, vol. 52(8), pages 1378-1395, November.
- Christopher Adam, 2006. "Riding the Wave: Monetary Responses to Aid Surges in Low-Income Countries," Economics Series Working Papers WPS/2006-04, University of Oxford, Department of Economics.
- Edward Buffie & Christopher Adam & Stephen O'Connell & Catherine Patillo, 2006. "Riding the Wave: Monetary Responses to Aid Surges in Low-Income Countries," CSAE Working Paper Series 2006-04, Centre for the Study of African Economies, University of Oxford.
- Olivier Jean Blanchard & Danny Quah, 1988.
"The Dynamic Effects of Aggregate Demand and Supply Disturbances,"
NBER Working Papers
2737, National Bureau of Economic Research, Inc.
- Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-73, September.
- Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbance," Working papers 497, Massachusetts Institute of Technology (MIT), Department of Economics.
- van Wijnbergen, Sweder & Budina, Nina, 2001.
"Inflation Stabilization, Fiscal Deficits, and Public Debt Management in Poland,"
Journal of Comparative Economics,
Elsevier, vol. 29(2), pages 293-309, June.
- Sweder van Wijnbergen & Nina Budina, 1999. "Inflation Stabilization, Fiscal Deficits and Public Debt Management in Poland," Tinbergen Institute Discussion Papers 99-022/2, Tinbergen Institute.
- Haque, Nadeem U & Montiel, Peter, 1989. "Consumption in Developing Countries: Tests for Liquidity Constraintsand Finite Horizons," The Review of Economics and Statistics, MIT Press, vol. 71(3), pages 408-15, August.
- Issing, Otmar, 1997. "Monetary targeting in Germany: The stability of monetary policy and of the monetary system," Journal of Monetary Economics, Elsevier, vol. 39(1), pages 67-79, June.
- van Wijnbergen, Sweder, 1989. "External Debt, Inflation, and the Public Sector: Toward Fiscal Policy for Sustainable Growth," World Bank Economic Review, World Bank Group, vol. 3(3), pages 297-320, September.
- Anand, Ritu & van Wijnbergen, Sweder, 1989. "Inflation and the Financing of Government Expenditure: An Introductory Analysis with an Application to Turkey," World Bank Economic Review, World Bank Group, vol. 3(1), pages 17-38, January.
When requesting a correction, please mention this item's handle: RePEc:ags:eprcrs:113615. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If references are entirely missing, you can add them using this form.