Following the tightening, credit growth collapsed to negative levels by the second half of 2012. These developments are illustrated in Figure 1, which shows year-on-year credit growth soaring to more than 30% in early 2011. After the tightening of monetary policy, the economy slowed down and the Bank of Uganda gradually cut the policy rate by a total of 1,100 bps. 2 This monetary tightening followed inflationary pressures from a large commodity price shock. In the second half of 2011, the Bank of Uganda raised the policy rate by a cumulative 1,000 basis points (bps). Between the second half of 2010 and June 2014, monetary conditions ranged from highly contractionary to highly expansionary.

Uganda is a fast-growing East African economy which experienced largely unanticipated variation in monetary policy during our period of analysis (2010–2014). In a recent paper, we test the bank lending channel of monetary policy in developing countries using Uganda as a laboratory for identification (Abuka et al. Prior studies document a weak or non-existent bank lending channel, but are confronted with data and methodological limitations. The role of banking-both its existence and governance-seems so essential to understanding how for example monetary policy is transmitted to the economy” (Blanchard 2014). Olivier Blanchard, IMF Chief Economist, argues that “the macroeconomics of low-income and of advanced economies are incredibly different. Stanley Fischer, the Federal Reserve's Vice Chairman, points out that in developing countries “interbank markets are still underdeveloped, and, even though some central banks use policy rates, changes to these policy rates have only limited effect on other interest rates and on the economy more generally” (Fischer 2015). This question is particularly pressing for developing countries, where the channels of monetary policy are impeded by financial underdevelopment and weak institutions (Beck et al. Leverage economic capital to consistently measure credit risk in the portfolioįirms can increase transparency in portfolio risk estimation, model risk profiles of complex instruments, incorporate region-specific correlation structures, and perform comprehensive stress testing.The ability of monetary policy to influence credit and the real economy is of central concern to policymakers and academics. Our approach allows you to track the performance of individual business units or portfolios and ensure safety for bondholders by using economic capital measures. Incorporate economic capital into decision-making With our data, models, and research, you can estimate capital with confidence when evaluating distributions of losses, earnings-at-risk, and other components of profitability to determine total return. You can leverage a variety of simulation methods for scenario analysis, using correlation, econometric, macroeconomic, or your own proprietary models along with our sophisticated analytics. Firms can maximize return on capital and address business needs associated with one-year VaR economic capital calculations and reporting.

Credit economix