The Effect of Monetary Policy on Private Sector Credit Growth in Uganda.
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Date
2023
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Abstract
This study investigated the effect of monetary policy on Private sector credit growth in Uganda. The specific objectives of the study included investigating the determinants of private sector credit growth in Uganda, examining the causal relationship between commercial lending rate, money supply and private sector credit growth. Employing the Vector Error Correction Model (VECM), the study used monthly time series data that spanned a period of 12 years ranging from 2010 to 2022. The results of the study showed that, in the short run, both money supply and lending rate have positive and significant effect on private sector credit growth while the positive effect of interbank rate was found not to be significant both in the short run and long run. The short run results also indicated that Treasury bill rate has a negative and significant effect on private sector credit growth. In the long run, money supply had a negative effect on private sector credit, though not statistically significant. Lending rate has a negative and significant effect on private sector credit growth in the long run. Treasury bill rate had a positive and significant effect on private sector credit growth in the long run. The granger casualty test indicated a uni-direction causation running from money supply to private sector credit growth, while a uni-direction causation was confirmed running from private sector credit growth to lending rate in Ugandan. The study recommends for further reforms aimed at maintaining monetary policy credibility and promotion of macroeconomic stability and financial sector development.
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A Dissertation Submitted to Makerere University Business School (Faculty of Graduate Studies and Research) in Partial Fulfilments of the Requirements for the Award of the Degree of Masters of Arts in Economic Policy and Management of Makerere University. (PLAN A).
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Citation
Emma, D . A (2023) The Effect of Monetary Policy on Private Sector Credit Growth in Uganda. Unpublished Masters Dissertation Makerere University Business School. Kampala, Uganda.