Economic growth and investment in Uganda

Abstract

World over, economic growth is the major goal of each government; therefore, the major objective of the present study is to establish the impact of investments on economic growth in Uganda from 1985 to 2016. To achieve this objective, the study develops a model from the traditional production function where investments were considered as one of the inputs of the production function in the economy. For analytical purposes, the study generates a single error correction model and considers three different cases each with one of the components of investment. Since the data used are secondary time series obtained from World Bank Development Indicators on line data base, we conduct the unit root tests on all the study variables including a test testing for co integration. The findings of the study indicate that investments have a significant positive impact on Uganda’s economic growth, other factors remaining constant. We show that private investments and investment in human capital contribute positively to growth. The study also established that trade pays a significant role in accelerating Uganda’s growth levels. However, public debt and inflation were found to play an insignificant role in as far as Uganda’s economic growth process is concerned. The study therefore recommends that the government should put more efforts in accelerating investments in the country. The government should put in place policies that will encourage both the local and foreign investors to invest in the country. We propose that the government should take a lead in investments by putting in place various incentives and also investing in infrastructure, human capital among others. The government should also put measures aimed at increasing trade levels in the country say through regional integration among other options.