Macroeconomic and market microstructure modelling of Ugandan exchange rate

Title: Macroeconomic and market microstructure modelling of Ugandan exchange rate
Creator: Katusiime, Lorna; Shamsuddin, Abul; Agbola, Frank W.
Relation: Economic Modelling Vol. 45, Issue February 2015, p. 175-186
Publisher Link: http://dx.doi.org/10.1016/j.econmod.2014.10.059
Publisher: Elsevier
Resource Type: journal article
Date: 2015
Description: This paper empirically investigates the usefulness of a hybrid model consisting of macroeconomic fundamentals and market microstructure variables in examining the dynamics of the Uganda shilling/US dollar foreign exchange rates. We employ macroeconomic fundamentals that are guided by the monetary model of exchange rates and market microstructure related frictions represented by order flow and bid-ask spreads to track long-run and short-run movements in exchange rates, respectively. Utilising the ARDL framework, we estimate the model using monthly data spanning the period January 1995 to March 2013. We find that our hybrid model is robust to alternative model specifications and provides an adequate framework to explain the dynamics of the Uganda shilling/US dollar foreign exchange rates.
Subject: exchange rates; monetary model; market microstructure; Uganda
Identifier: http://hdl.handle.net/1959.13/1333638
Identifier: uon:27113
Identifier: ISSN:0264-9993
Language: eng
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