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| The Macroeconomic Determinants of Economic Growth in Uganda a Case Study Of Wakiso Distict
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Mwetegyereze Frank, Kamugisha Nelson, Dr Ariyo Gracious Kazaara, Tukamuhebwa Deus, Friday Christopher, Mutesi Catherine
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Abstract:
Using a cointegration approach, the research examined at the macroeconomic variables impacting economic growth in Uganda. For the analysis of the macroeconomic factors influencing Uganda's economic growth, the researcher used statistical software from the E - views 11 student version. The study's objectives were to look into the variables that influence gross domestic product (GDP) in Uganda, to see whether the volume of foreign direct investment flows affects GDP there, to see if inflation rates affect GDP here anyway, and to see if exchange rates affect GDP there. The primary objective of this research was to use the Johansen method of cointegration to analyze the key macroeconomic factors that influence economic growth in Uganda between 1990 and 2019. All The real effective exchange rate is the only variable that is integrated at first order, hence the Johansen's cointegration method was utilized. In accordance with the study, real effective exchange rate has a negative impact on growth in real gross domestic product per capita, while foreign direct investment (as a proportion of Gdp) and inflation (consumer prices) have positive effects. In the long run, Uganda's real GDP per capita increase is significantly influenced by the real effective exchange rate. Inflation (consumer prices) has become statistically significant factor in determining the rise of real gross domestic product per capita in the short run. The following recommendations for policy are offered in light of the findings: The Bank of Uganda should utilize monetary policy to boost aggregate demand in order to stimulate the economy because there is a significant positive relationship between inflation and growth in gross domestic product per capita. It is therefore advised that the government of Uganda continue to attract more foreign capital inflow through trade liberalization if it is to achieve its growth target of 8 percent growth rate per annum because there is a positive relationship between FDI and gross domestic product per capita growth. The most significant political result from the research on the inverse relationship between economic expansion and exchange rate, however, points to the significance of an exchange rate management framework that supports Uganda's current inflation targeting regime. Policymakers in Uganda must prevent increasing fluctuations in the exchange rate by taking into account its detrimental impact on economic growth rather than entirely liberalizing it within the framework of the inflation targeting method adopted.
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