Title: Short-Run Relationship Between Infrastructure Expenditure And Economic Growth In Uganda, 1990-2023
Authors: Barigye Nicholas, Dr. Abuga Isaac Mukono & Wabomba Kadili
Volume: 9
Issue: 8
Pages: 122-131
Publication Date: 2025/08/28
Abstract:
: This study examines the short-run relationship between infrastructure expenditure and economic growth in Uganda from 1990 to 2023. Using time series econometric techniques, including the Augmented Dickey-Fuller (ADF) test, Johansen Cointegration Test, Vector Error Correction Model (VECM), and Vector Autoregression (VAR), the analysis aims to understand how infrastructure spending influences GDP growth in the short run. ADF test results show that both infrastructure expenditure and GDP growth are stationary at the 5% level, validating their use in further modeling. The Johansen Cointegration Test identifies one cointegrating relationship, indicating that the variables move together in the long term. However, VECM results reveal a negative long-run coefficient for GDP growth (-730.006), suggesting that increased infrastructure expenditure is associated with a decline in GDP growth over time. This counterintuitive result may reflect time lags in infrastructure returns, inefficiencies, or fiscal pressures from debt-financed projects. VAR analysis further shows that while past GDP growth positively influences future infrastructure spending, infrastructure expenditure has a minimal short-run impact on GDP growth. This implies that economic growth tends to precede rather than result from infrastructure investment in the short run. The findings underscore the importance of efficient and well-targeted infrastructure investments to maximize economic returns. Policymakers are advised to improve project planning and execution, ensure accountability in public spending, and promote private sector participation to enhance infrastructure outcomes. Further research is recommended to explore sector-specific impacts and the role of public-private partnerships in fostering sustainable economic growth in Uganda.