This study examines the impact of the real exchange rate volatility on the level and volatility of\r\nUganda�s bilateral trade flows with several major trade partners. The study uses secondary data\r\nin a two-way bilateral trade flow basis between Uganda and seven of her major trading partners.\r\nPanel data methods are used in the analysis. The exchange rate used in the panel analysis is the\r\ncurrency rate between the US dollar and Ugandan Shilling. We use GARCH(1,1) to develop\r\nmeasures of volatility for the real exchange rate and bilateral trade flows. The results show that\r\nreal exchange rate volatility has a negative and significant effect on the level of Uganda�s\r\nbilateral trade flows. The results also show that real exchange rate volatility has a positive and\r\nsignificant effect on the volatility of bilateral trade flows. Thus, it can be seen that prudential\r\nmanagement of the real exchange rate is very crucial for trade promotion and macroeconomic\r\nstability.
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