Effects of Exchange Rate Volatility on Trade Balance of Uganda: Using Co-Integration and Vector Autoregressive Correction Model Approach

Effects of exchange rate and its variability on trade flows remains an interesting outcome for Uganda for the last two decades when flexible exchange rate regime was adopted, increasing the exposure of trade flows to currency behaviour risk. In effect, the country’s trade balance remains in deficit due to great variability of her trade flows. This book provides empirical investigation of possible casual effects of exchange rate volatility and other policy variables on trade balance of Uganda. Results indicate that exchange rate variability effect on Uganda's fragile economy is real as it causes instability in other macroeconomic fundamentals. Medium and long term policies to smoothen exchange rate volatility and improve trade flows have been proposed in this book. The contents of this book provide useful contributions to the empirical basis needed for proper management of monetary and trade policies as the country moves towards self reliance. Policy makers and professionals would find reading this piece as valuable and informative.