Effect of fiscal and monetary policy on headline inflation in Uganda

Abstract

The aims of this study were to examine the effect of monetary policy and fiscal policy on headline inflation in Uganda and then determine which of these two policies has a higher impact on headline inflation in Uganda. The study period was from 2009 to 2019. The method of Ordinary Least Squares estimation technique was used in this study. The results obtained from the two multiple regressions were spurious free. The study revealed that monetary policy impacts on Ugandan headline inflation positively. Also, the study found that fiscal policy impacts on Ugandan headline inflation positively. Finally, the study revealed that monetary policy is more powerful on impacting headline inflation in Uganda. The study recommends that the central government should review the quality of government spending as well as maintain budget deficit at the low level as well as the central bank should review the inflation targeting policy and control the money supply, both narrow money and quasi-money