AN EMPIRICAL ANALYSIS OF THE LINK BETWEEN FISCAL DEFICITS, MONETARY EXPANSION, AND INFLATION IN UGANDA (2007–2020)

Sayid Omar Mohamed Ali; Abdirahman Kasim Mohamed Abdullahi

doi:10.17261/Pressacademia.2025.2003

AN EMPIRICAL ANALYSIS OF THE LINK BETWEEN FISCAL DEFICITS, MONETARY EXPANSION, AND INFLATION IN UGANDA (2007–2020)

Abstract

Purpose – This study provides an empirical analysis of the relationship between fiscal deficits, monetary expansion, and inflation in Uganda using quarterly data from 2007 to 2020. It seeks to determine both the short- and long-run drivers of inflation and establish causal relationships among the variables. Methodology – The Autoregressive Distributed Lag (ARDL) bounds testing approach was employed to estimate short- and long-run effects, while Granger 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 increase inflation, while GDP (–0.27) and interest rate (–0.018) reduce it. Terms of trade were insignificant. In the short run, both fiscal deficit and money supply exert positive and significant effects on inflation. The error correction term indicates that 67% of disequilibrium is corrected within a quarter. 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 helps stabilize 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.

Keywords

References

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Details

Primary Language

English

Subjects

Finance

Journal Section

Research Article

Authors

Sayid Omar Mohamed Ali
0009-0000-3719-8573
Somalia

Abdirahman Kasim Mohamed Abdullahi
0009-0001-1129-6265
Uganda

Publication Date

December 31, 2025

Submission Date

September 5, 2025

Acceptance Date

November 19, 2025

Published in Issue

Year 2025 Volume: 12 Number: 2

DOI

https://doi.org/10.17261/Pressacademia.2025.2003

IZ

https://izlik.org/JA46UA63TU

Cite

RIS / Bibtex

APA

Ali, S. O. M., & Abdullahi, A. K. M. (2025). AN EMPIRICAL ANALYSIS OF THE LINK BETWEEN FISCAL DEFICITS, MONETARY EXPANSION, AND INFLATION IN UGANDA (2007–2020). Journal of Economics Finance and Accounting, 12(2), 92-102. https://doi.org/10.17261/Pressacademia.2025.2003

AMA

1.Ali SOM, Abdullahi AKM. AN EMPIRICAL ANALYSIS OF THE LINK BETWEEN FISCAL DEFICITS, MONETARY EXPANSION, AND INFLATION IN UGANDA (2007–2020). JEFA. 2025;12(2):92-102. doi:10.17261/Pressacademia.2025.2003

Chicago

Ali, Sayid Omar Mohamed, and Abdirahman Kasim Mohamed Abdullahi. 2025. “AN EMPIRICAL ANALYSIS OF THE LINK BETWEEN FISCAL DEFICITS, MONETARY EXPANSION, AND INFLATION IN UGANDA (2007–2020)”. Journal of Economics Finance and Accounting 12 (2): 92-102. https://doi.org/10.17261/Pressacademia.2025.2003.

EndNote

Ali SOM, Abdullahi AKM (December 1, 2025) AN EMPIRICAL ANALYSIS OF THE LINK BETWEEN FISCAL DEFICITS, MONETARY EXPANSION, AND INFLATION IN UGANDA (2007–2020). Journal of Economics Finance and Accounting 12 2 92–102.

IEEE

[1]S. O. M. Ali and A. K. M. Abdullahi, “AN EMPIRICAL ANALYSIS OF THE LINK BETWEEN FISCAL DEFICITS, MONETARY EXPANSION, AND INFLATION IN UGANDA (2007–2020)”, JEFA, vol. 12, no. 2, pp. 92–102, Dec. 2025, doi: 10.17261/Pressacademia.2025.2003.

ISNAD

Ali, Sayid Omar Mohamed - Abdullahi, Abdirahman Kasim Mohamed. “AN EMPIRICAL ANALYSIS OF THE LINK BETWEEN FISCAL DEFICITS, MONETARY EXPANSION, AND INFLATION IN UGANDA (2007–2020)”. Journal of Economics Finance and Accounting 12/2 (December 1, 2025): 92-102. https://doi.org/10.17261/Pressacademia.2025.2003.

JAMA

1.Ali SOM, Abdullahi AKM. AN EMPIRICAL ANALYSIS OF THE LINK BETWEEN FISCAL DEFICITS, MONETARY EXPANSION, AND INFLATION IN UGANDA (2007–2020). JEFA. 2025;12:92–102.

MLA

Ali, Sayid Omar Mohamed, and Abdirahman Kasim Mohamed Abdullahi. “AN EMPIRICAL ANALYSIS OF THE LINK BETWEEN FISCAL DEFICITS, MONETARY EXPANSION, AND INFLATION IN UGANDA (2007–2020)”. Journal of Economics Finance and Accounting, vol. 12, no. 2, Dec. 2025, pp. 92-102, doi:10.17261/Pressacademia.2025.2003.

Vancouver

1.Sayid Omar Mohamed Ali, Abdirahman Kasim Mohamed Abdullahi. AN EMPIRICAL ANALYSIS OF THE LINK BETWEEN FISCAL DEFICITS, MONETARY EXPANSION, AND INFLATION IN UGANDA (2007–2020). JEFA. 2025 Dec. 1;12(2):92-102. doi:10.17261/Pressacademia.2025.2003