Economic Diversification and Growth

Annex 3: Key Features of the Uganda Macroeconometric Model (MacMod-UG)
Basic Features:
• The structure of the model is composed of three main blocks:
o A macro framework, that projects GDP with its components (uses and sources), national accounts (Government
Financial System (GFS), Balance of Payments, and Monetary Aggregates); and debt (internal and external) in the
short and medium-term, ensuring the balance of flows of funds.
o A Framework for Medium-Term Expenditure (MTEF), which is connected to the model, allowing to: (i) specify
the budget allocations to the ministries in line with the guidelines of the (NDP), (ii) fit all expenditures with the
revenues and overall funding capacity to ensure consistency between the structure of the MTEF spending and the
GFS.
o A “Poverty / MDGs” module, that projects the indicators of poverty and human development (poverty incidence,
MDGs, education, and health etc.).
• The GDP includes five major sectors, including agriculture and related rural activities (forestry, animal husbandry and fish
farming), mining (oil and other mining products), manufacturing, other industrial activities (energy, water, etc.), administration
and market services. Mining and administration are the main “exogenous”.
• Growth in other sectors is determined by the medium and long-term trends that are based on the factors of production (human
and physical productive capital), previous exogenous dynamics, the international situation, and the internal environment.
Modeling features:
Potential Growth
• Per capita GDP Growth: g(yt)= f(g*, Zt, y(t-1)) (1)
• Potential Growth: g*t = f (kpt, kft, ht, NMSt/NYt, CIMt) (2)
o Where: g*t: Growth of potential per capita GDP ; kpt: Per capita productive capital Stock; kft: Per capita
infrastructure capital Stock; ht: Per capita human capital stock; (NMS/NY): Indicator of financial depth
(money supply / GDP); CIMt: Openness indicator (import capacity) ; Zt: Vector of short-term fluctuations
of factors.
135Annexes