jefa Journal of Economics Finance and Accounting 2148-6697 Suat TEKER Finance Finans AN EMPIRICAL ANALYSIS OF THE LINK BETWEEN FISCAL DEFICITS, MONETARY EXPANSION, AND INFLATION IN UGANDA (2007–2020) https://orcid.org/0009-0000-3719-8573 Ali Sayid Omar Mohamed https://orcid.org/0009-0001-1129-6265 Abdullahi Abdirahman Kasim Mohamed 12 31 2025 12 2 92 102 09 05 2025 11 19 2025 Copyright © 2014, Journal of Economics Finance and Accounting 2014 Journal of Economics Finance and Accounting

Purpose – This study provides an empirical analysis of the relationship between fiscal deficits, monetary expansion, and inflation in Uganda usingquarterly data from 2007 to 2020. It seeks to determine both the short- and long-run drivers of inflation and establish causal relationships amongthe variables.Methodology – The Autoregressive Distributed Lag (ARDL) bounds testing approach was employed to estimate short- and long-run effects, whileGranger causality tests were used to examine causal links. Diagnostic and stability tests were applied to validate the robustness of the model.Findings – The results demonstrate that, in the long-run, money supply (0.33), fiscal deficit (0.28), and exchange rate (0.32) significantly increaseinflation, while GDP (–0.27) and interest rate (–0.018) reduce it. Terms of trade were insignificant. In the short run, both fiscal deficit and moneysupply exert positive and significant effects on inflation. The error correction term indicates that 67% of disequilibrium is corrected within aquarter. Granger causality results confirm unidirectional causality running from fiscal deficit and money supply to inflation.Conclusion – The study concludes that fiscal deficit and money supply are the primary sources of inflation in Uganda, while GDP growth helpsstabilize prices. Effective coordination of fiscal and monetary policy is essential. Policymakers should reduce fiscal deficits, regulate money supply,and stabilize the exchange rate, while promoting growth-enhancing strategies to ensure long-term price stability.

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