Monetary Policy, Financial Frictions and Structural Changes in Uganda: A Markov-Switching DSGE Approach

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dc.contributor.authorAnguyo, Francis Leni
dc.contributor.authorGupta, Rangan
dc.contributor.authorKotzé, Kevin
dc.date.accessioned2022-11-14T17:33:30Z
dc.date.available2022-11-14T17:33:30Z
dc.date.issued2020
dc.description.abstractThis paper considers the use of regime-switching dynamic stochastic general equilibrium models for monetary policy analysis and forecasting purposes. The objective is to determine whether or not the inclusion of these regime-switching features provide a more accurate description of the economy in a particular lowbincome country. All of the models incorporate financial frictions that are introduced through the activities of heterogeneous agents in the household and several other features that are incorporated in most small open-economy models. Two variants of regime-switching models are considered: one includes switching in the monetary policy rule (only) and the other employs switching in both the monetary policy rule and the volatility of the shocks. The models are applied to the quarterly macroeconomic data for Uganda and most of the parameters are estimated with the aid of Bayesian techniques. The results of the extensive inand out-of-sample evaluation suggest that the model parameters do not remain constant over the two regimes. In addition, the transition probabilities suggest that there are three distinct periods where the central bank response has been more aggressive. These periods relate to a change in policy framework and significant shocks that have affected the Ugandan economy. It is also noted that the forecasting performance of the regime-switching models are possibly superior to the model that excludes these features over certain horizons.en_US
dc.identifier.citationLeni Anguyo, F., Gupta, R., & Kotzé, K. (2020). Monetary policy, financial frictions and structural changes in Uganda: a Markov-switching DSGE approach. Economic research-Ekonomska istraživanja, 33(1), 1538-1561.https://doi.org/10.1080/1331677X.2020.1757480en_US
dc.identifier.issn1538–1561
dc.identifier.urihttps://nru.uncst.go.ug/handle/123456789/5246
dc.language.isoenen_US
dc.publisherEconomic research-Ekonomska istraživanjaen_US
dc.subjectMonetary policy; inflationtargeting; financial frictions; small open-economy; low income country; dynamic stochastic general equilibrium model; Bayesian estimationen_US
dc.titleMonetary Policy, Financial Frictions and Structural Changes in Uganda: A Markov-Switching DSGE Approachen_US
dc.typeArticleen_US
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