Browsing by Author "Niyonshimye, Sonia"

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    The Effect of Monetary Policy Variables on Tax Revenue Collections in Uganda.
    (Makerere University Business School, 2025-11-07) Niyonshimye, Sonia
    This study examines the effect of monetary policy variables on tax revenue collections in Uganda, focusing on exchange rates, M2 money supply, and interest rates. Using the Vector Error Correction Model (VECM) analysis, the research evaluates the relationships between these monetary policy instruments and tax revenue performance. The findings reveal that M2 money supply has a positive and statistically significant effect on tax revenue, indicating that increased liquidity enhances taxable economic activity. Similarly, exchange rate depreciation significantly boosts tax collections. However, while interest rates exhibit a negative coefficient, the effect is statistically insignificant. Based on these findings, the study recommends a balanced monetary policy approach that ensures adequate liquidity to stimulate economic activity while avoiding inflationary pressures. A managed float exchange rate regime is advised to harness the revenue benefits of moderate depreciation while minimizing economic instability. Although interest rates show an insignificant impact, cautious adjustments are recommended to avoid stifling private sector growth. Additionally, the study underscores the need for enhanced policy coordination between the Bank of Uganda, the Ministry of Finance, and the Uganda Revenue Authority to align monetary and fiscal policies effectively. Long-term structural reforms, including financial market deepening, formalization of the informal sector, and improved tax compliance mechanisms, are also critical to strengthening the revenue-generating effects of monetary policy. These insights provide valuable guidance for policymakers seeking to optimize tax revenue mobilization through strategic monetary policy management in Uganda.