Uganda’s labour market is typically characterized by extensive productivity and earning variations with large amounts of labour trapped and toiling in low-productivity subsistence activities. A policy aimed at reallocating such underemployed labour to higher productivity activities plays a role in tackling the unemployment problem and is a top priority for policymakers. This study examines the asymmetric effects of differential sectoral growth on unemployment in Uganda, considering both the size and composition effect of sectoral growth. The results of this study indicated that a positive shock in agricultural sector value added has a positive causal effect on unemployment. Also, a positive and negative shock in the industrial sector does not affect the level of unemployment. Finally, both a positive and negative shock in the service sector value added has a negative effect on the unemployment level. Another interesting finding of this study is that both the size and composition of sectoral growth matter in addressing the unemployment problem in Uganda. Therefore, both positive and negative shocks should be forecasted and incorporated in government planning frameworks for short, medium, and long particularly during manpower planning. However, sectors with higher labour intensity should be prioritized in budgetary allocations, the government should devise means of reducing underemployment of labour trapped in low-productivity agriculture and other small-scale production activities to create meaningful employment.
Due to the increasing concern regarding the unemployment problem in the East African Community (EAC), this study examines the macroeconomic determinants of unemployment using panel data approaches. The study used annual data for the period 1996 to 2017, which was obtained from the International Labour Organization (ILO) and the World Bank database of the World Development Indicators of 2018. The study estimated the random effects and fixed effects models. Importantly, instrumental variable-fixed effects regression was estimated to control for the potential endogeneity in the regression. The study findings indicate that unemployment in the EAC is likely to decrease with sustained economic growth and increased supply and access to private sector credit while, on the other hand, increased trade openness and gross national expenditure are likely to exacerbate the unemployment problem. Therefore, the study recommends measures to increase economic growth (such as promoting high productivity industries with high employment intensity), enhance competitiveness and reasonable protection of infant firms (e.g., through subsidized credit), and enhance supply and access to credit by the private sector (such as risk insurance and reduction of interest rates). JEL Code: E24, J01 J2.
Uganda’s interest rate spreads have persistently remained high despite the financial liberalisation undertaken in the 1990s. Using data for 24 banks, we assess the determinants of interest rate spreads in Uganda’s commercial banking sector for the period 2005-2015. Results show that, among the bank-specific factors, interest rate spreads increase with increase in credit risk, liquidity risk, and capital adequacy ratio. Contrary to most studies and a priori expectations, non-interest income is shown to be positively related to bank spreads. Bank size is shown to be negatively related to interest rate spreads. For industry-specific factors, foreign bank participation in loans markets is associated with higher spreads. For macroeconomic factors, high inflation rates are shown to translate into high spreads, whilst high real GDP growth rates and broad money supply are associated with lower spreads. Contrary to theory and most literature, exchange rate volatility is associated with lower bank spreads. Going forward, banks and government should devise mechanisms to encourage loan repayment, and banks should be encouraged to reduce on holding excess liquid assets. At a macro-level, the Bank of Uganda should maintain its stance on curbing inflation. Economic growth and financial development should as well be encouraged. JEL Classifications: C23; E43; E44; G21; L11
The East African (EA) countries have run budget deficits for over a decade, implying that the amount of tax is low compared to what is required for the smooth-running of their economies. Although several studies have attempted to explore factors behind low tax revenues, these have overly concentrated on the supply side factors (sectoral contributions to GDP, GDP per capita, and inflation). Moreover, these studies have had conflicting results on the determinants of tax revenue. This study, therefore, seeksto investigate the effect of the quality of governance on the amount of tax revenue in the EA countries (1996 to 2016). The study employs the Panel Autoregressive Distributed Lag model as developed by Pesaran et al. (1999). Empirical evidence from the pooled mean group shows a positive long-run relationship among the variables, implying that an improvement in the quality of governance leads to a long-run increase in tax revenue. Therefore, long-run efforts to increase tax revenue in EA should focus on improvements in the quality of governance. However, the study finds a negative short-run relationship.
Does uncertainty necessarily change the way in which fiscal policy affects output growth in Uganda? We provide an empirical response to this fundamental question using the latest datasets and a rigorous econometric practice. Fiscal policy is often manipulated in many countries as one of the means to provide counter-cyclical stimulus over the cycle of uncertainties. Indeed, fiscal policy operations frequently vary with uncertainty sequence and this introduces bidirectional interactions between fiscal policy, uncertainty and output growth. Using the Autoregressive Distributed Lag Model, we show that tax revenue and expenditure are the most affected fiscal policy measures in the presence of uncertainty, while borrowing is the least affected both in the short and long-run. Therefore, unless government macroeconomic frameworks fully incorporate economic uncertainties into projections, the fragility of rising global and domestic uncertainty is bound to cause large and significant divergencies between the anticipated and the actual growth outturn. We therefore recommend the need to use borrowing avenue in the most optimal means to stimulate and sustain growth. While tax revenues have proved to spur growth both in the short and the long-run, the impact is bound to shrink in the face of uncertainty.
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