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| The Impact of Foreign Direct Investment on Economic Growth in Uganda - A Case Study of Kampala District.
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Turyatemba Christopher, Kamugisha Nelson, Kobusigye Prudence
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Abstract:
This study set out to provide evidence for the impact of foreign direct investment on economic growth with a case study of Kampala district while using consumption rates, inflation rates, gross domestic product and population growth rate as proxy variables for the period 1988-2018. It was empirically confirmed that inflation rates and population growth rate had a strong positive significant relationship with economic growth. Unit root tests were carried out using Augmented Dickey Fuller test and findings showed that some variables were non-stationary at level but were differenced to achieve stationarity. Co-integration was established using Engle Granger Co-integration test citing existence of a long run relationship amongst the variables. The speed of adjustment of the variables to long run was 47 percent within a one-year lag period. 88 percent of the variations in Economic growth were jointly explained by gross domestic product, population growth rate, inflation rates and consumption rates. 25 percent of the variations in economic growth were explained by other variables contained in the error term thus not included in the model. The F statistic was statistically significant thus inflation rate and population growth rate have a significant effect on economic growth in the short run. Autoregressive distributed lag model approach was used and the results confirmed export led hypothesis for the long run and not short run. He proposed the liberalization of trade policy instead of export expansion policies. In the Tanzanian Context, Romanus & Dickson (2019) have analyzed the export and economic growth nexus for the period 1980-2015. Exports are measured in percentage change of goods sold abroad and findings show a long run relationship between consumption rates and economic growth. They insist that there is need to review export strategies and policies in order to strengthen the economic growth levels in Tanzania. Granger Causality test was applied for finding causality between population growth rate and economic growth. The results indicated significant relation between import and economic development for all six countries. The same analysis has also been conducted for OECD countries by Tahir (2013). The result showed that an increase in inflation rates by one percent is significantly related with economic growth
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