The monetarist explanation of inflation: the experience of Uganda 1970-1993.
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Date
1996
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Publisher
University of Dar es Salaam
Abstract
Uganda experienced high rates of inflation in the 1970s which continued to rise until the 1980s. The worst inflationary situation was recorded in 1987 when inflation struck it's highest peak (234.3%), ever recorded in the price history of Uganda. Money supply expansion turns out to be the major bottleneck to any efforts aimed at effective control of inflation. This study therefore explores the empirical and theoretical issues which lie behind the persistence of inflation in Uganda with emphasis on the monetarist thesis that inflation is everywhere and at all times a monetary phenomenon. Using time series data and a single equation model, the study tests the relationship between inflation and monetary growth in Uganda. The estimated model does not reject the hypothesis that inflation in Uganda is a monetary phenomenon. Other structural variables namely imported inflation and exchange rate are added for comparison purposes. That they turn out to be insignificant gives further support to our hypothesis that inflation in Uganda is largely a monetary phenomenon. In view of the above, the study recommends a consistently strict monetary policy in a bid to control inflation. Given that monetary growth oftenly results from, among others, excessive government and private sector borrowing, and excessive credit creation, the study recommends the control of these factors as a means of reducing fast money supply growth and hence inflation.
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Available in print form
Keywords
Inflation and deflation, Demand for money, Tanzania
Citation
Turyarugayo, E. S. (1996). The monetarist explanation of inflation: the experience of Uganda 1970-1993. Master dissertation, University of Dar es Salaam. Available at (http://41.86.178.3/internetserver3.1.2/search.aspx?formtype=advanced)