Inflation and Gross Domestic Product (GDP) in Uganda (1984- 2014)
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Date
2016-04
Authors
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Journal ISSN
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Publisher
Kampala International University, College of Economics and Management Sciences .
Abstract
This research investigated the effect of inflation rate on gross domestic product (GDP)
in Uganda during the period of 1984-2014 by using Correlation and Linear regression
analysis to analyse and interpret the findings of data.
The rate of gross domestic product was falling for the last four years in Uganda
(UBO5).The researcher obtained yearly collected data of the two variables under this
study from the Bank of Uganda website, Uganda bureau of statistics and World Bank.
The researcher found that the trend of Inflation rate was not stable and kept changing
from tirtie to time while the government did a lot of efforts to solve and did something
good, while the trend of GDP growth rate was falling down little bit from time to time.
The researcher found negative and insignificant relationship between inflation rate and
GDP growth rate for Uganda from 1984 -2014, The coefficient of determination (R2) is
0.043 implied that only 4.3% of the variations in economic growth (GDP) have been
explained by inflation and about 95.7% was captured by other factors which have
substantial influence on GDP but were excluded from the model . This regression
analysis agrees with the correlation analysis that the Pearson’s correlation
coefficient(r=-0.274) implying that there is a negative relationship between inflation
rate and GDP growth rate in Uganda. The coefficient of determination (r2=0.075),
shows that changes in inflation rate reduces GDP growth rate by just 7.5% and 92.5%
of other factors reduces and affects GDP growth rate. These findings are also in line
with many of the literature review. Results also indicate that in developing countries like
Uganda there are other factors that explain GDP growth rate than inflation and
therefore to study GDP in developing countries, there is need to employ more factors
other than inflation alone. These results have important policy implications. Moderate
inflation is helpful to growth, thus Uganda should ensure that its inflation doesn’t move
to a double digit but should evolve on moderate inflation rate.
Description
A thesis report submitted to the College of Higher Degrees and
Research in Partial Fulfillment for the Award of Master Degree
in Economic Planning and Policy of Kampala
International University Uganda.
Keywords
Gross Domestic Product, Inflation, Uganda (1984- 2014)