Macroeconomic determinants of consumer price indices in Uganda
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This study is an investigation, on macroeconomic variables influencing prices of Goods and Services in Uganda. The conceived variables are interest rates (%), exchange rates (%), Inflation (%), money supply (UGX) and economic growth (UGX) while the outcome variable is the average prices of goods and services in Uganda for the period 1993-2018. Specifically, this study attempted to estimate the mean, or the average value of the consumer price indices (CPI), examine the effect of exchange rate (UGX/US$), commercial banks rediscount rate, lending rate, money supply, M2 (UGX billion) on the Consumer Price indices (CPI) of Uganda using monthly data for the period 2005-2019. Strictly secondary data source was utilized. The data set of annual observations spanning from 2005 to 2019 were obtained from the Bank of Uganda website from the data set updated by BOU every month before the reading of the year. An ordinary least squares method was utilized in the study Results showed that if exchange rate declines by one UGX, on average, consumer prices would rise by about, if the rediscount rate moved up by a unit, on the average, consumer prices 23% would be expected to grow by about 10 percentage units, if lending rate was kept high by most banks, it would wreck the borrowing behavior of investors and thus keep consumer commercial prices of goods and services high. If imports raise by one UGX, on the average, the expenditure would reduce if consumers go up by about 0.98575 shillings while consumer expenditure on the exports volume increased by a unit. Based on the empirical results of this study, investors should keep keen interest on the changes in macroeconomic aggregates such as interest rates as it has proved to exhibit an indirect relationship with consumer prices.