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ItemDetermination of real interest rate in Uganda 1986-2016(Sentamu, M. (2019). Determination of real interest rate in Uganda 1986-2016. Unpublished master’s thesis, Makerere University, 2019-11-01) Sentamu, MartinThis study examined the determinants of real interest rates in Uganda from 1986 to 2016, using an ECM model after establishing co-integration. The findings revealed that GDP growth rate, inflation rate, and money supply significantly influence real interest rates, though to varying degrees. A unit increase in GDP growth rate raises real interest rates by 0.899 units, while a unit increase in inflation rate reduces real interest rates by 0.241 units. Money supply (M2) showed the largest positive effect, with a unit increase raising real interest rates by 1.64 units, contrary to traditional theory but aligning with the notion that limited money supply raises interest rates. The study found positive relationships between real interest rates, GDP growth, and money supply, while inflation had an inverse relationship. The study recommends that the Ugandan government, through institutions like the Bank of Uganda, implement policies to stabilize macroeconomic variables. Emphasis on inflation control through sound macroeconomic policies is crucial, as lower inflation promotes investment by maintaining high real interest rates. High real interest rates increase demand for securities, contributing to GDP growth and economic progress toward middle-income status. Further recommendations include expediting economic growth policies aligned with Vision 2040, such as industrialization, agricultural modernization, and infrastructural development, to attract investment and enhance output. Addressing structural issues contributing to inflation, rather than solely monetary factors, is essential for stabilizing real interest rates, boosting investment, and fostering aggregate demand growth.
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ItemDomestic investment and economic growth in Uganda: A time series analysis (1986-2016)(Makerere University, 2023-08) Namulondo, Edna PriscillaThe Ugandan economy is a mixed economy where both the public and private sector play a dominant role in terms of development potential. Uganda has implemented an ambitious programme of economic liberalization with reforms targeted at restoring macroeconomic stability and fiscal discipline, while improving the investment climate and growing the economy as witnessed by the various development agenda such as the NDP I &II, the Vision 2040, Presidential Initiatives, BUBU programme among others. These economic reforms have led to improved both local and foreign investor confidence in Uganda.The main objective of this research was to study the effects of domestic investment on economic growth in Uganda using secondary time series data for the period 1986 to 2016 from the World Bank’s database. The researcher used ordinary least squares method to test for the long run relationship. In order to test for the short run relationship and to determine the speed of adjustment between the short-run and long-run equilibrium, the vector error correction model was applied; while the Granger causality test was applied to test for the long-run causal relationship between the variables. The variables that were investigated in this study included economic growth, gross domestic investment, gross human capital formation, foreign direct investments, gross national expenditure, exports and imports of goods and services.The empirical results show that gross domestic investment significantly affects economic growth positively (0.442) and negatively (0.243) at 1 percent level of significance. Contrariwise the ratios of household final consumption expenditure, gross national expenditure, gross human capital formation, exports and imports do not significantly affect economic growth in as much as the exports had a positive relationship with economic growth. Results from the short-run model reveal that the Error Correction Term has a correct negative (-0.255) sign which is significant at 5 percent level of significance, which implies that in each period, economic growth adjusts between the current level and the long run equilibrium level and regressors bring about convergence in the long run. The Granger-causality tests revealed that domestic investment does granger-cause economic growth and economic growth positively Granger-cause domestic investment. Thus, there is a bidirectional relationship running from economic growth to domestic investment. Since Uganda has been pursuing a policy direction of attracting home grown investments under the theme “Buy Uganda Build Uganda (BUBU),the study recommends deliberate efforts to empower the local investors especially encouraging them to acquire technology that would enhance transfer of knowledge from their foreign counterparts.