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Title: The impact of exchange rate variability on Uganda's exports (1988-2001) : an empirical investigation of the long-run effects of exchange rate variability on aggregate exports and specific commodity sub-sector export flows of Uganda during the floating exchange rate regime.
Author: Kihangire, David.A
Awarding Body: University of Bradford
Current Institution: University of Bradford
Date of Award: 2004
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Abstract:
This thesis examines the effect of exchange rate variability on Uganda's exports after her adoption of the floating exchange rate regime in November 1993. Critically reviewing the theoretical and empirical literature, it reveals that following the global advent of the floating exchange rate regime in 1973, most studies have tried to investigate this subject by testing the hypothesis that exchange rate variability is a major source of risk, whose effects are likely to lead to reduced international trade volumes. However, there are also plausible arguments that exports may be invariant or positively correlated with exchange rate variability. The inconclusive debate at the theoretical level implies that the impact of exchange rate variability on export flows is largely an empirical issue. An important research gap in the literature is that while most studies have focused on industrial countries with a sizable share of manufactured goods in the export sector, there are limited studies focusing on specific agricultural primary commodity dependent economies in LDCs under the floating exchange rate regime. Furthermore, the main issues and concepts pertinent to agricultural primary commodity dependent economies (i.e. the Prebisch-Singer thesis; devaluation theory; and elasticity pessimism), if omitted, are likely to lead to spurious results. This study contributes to the literature in these respects. 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 tested the central hypothesis that 'Uganda's exports are negatively and significantly correlated with exchange rate variability.' Taking into account the main issues, the study then adapts a conceptual framework within an imperfect substitution export model developed by Goldstein and Khan (1978, 1985) as the basis for the investigations. Using monthly data, the thesis investigates the effects of exchange rate variability on Uganda's aggregate export volumes under the floating exchange rate policy regime (1994-2001), benchmarked on the fixed exchange rate regime (1988-1993). 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 were applied. Consequently, the study estimated, tested, and compared the marginal impact of exchange rate variability on Ugandan real export value index based on (i) aggregate real export value index, (ii) total real coffee export value index, (iii) total real tea export value index; (iv) total real fish export value index; and total real flower export value index. Overall, the results suggest support for the research hypothesis: Uganda's exports are significantly and negatively correlated with exchange rate variability in the bureau- and interbank markets under the floating exchange rate regime. However, the response is not symmetrical across all Uganda's primary commodity exports, partly on account of specific structural characteristics such as perishable green tea and flowers, or durable commodities such as coffee beans. The results contrast with those corresponding to the fixed exchange rate regime, where the correlation is invariantly zero. The policy implication is that intervention targeting the minimisation of excessive nominal- and real effective exchange rate volatility under the floating regime may contribute to supporting exports and economic growth, and overall macroeconomic stability in Uganda.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID: uk.bl.ethos.655480  DOI: Not available
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