The effect of international trade liberalization on the growth of export in Uganda.

Abstract

This study examines the effect of international trade liberalization on Uganda's export growth using annual time series data from 1990 to 2023. Employing the Augmented Dickey Fuller (ADF) and Phillips-Perron (PP) tests to establish unit root properties, the research finds that inflation and terms of trade are stationary at level, while export growth, trade openness, exchange rate, and regulatory quality are stationary after first differencing. The empirical results from the Autoregressive Distributed Lag Model (ARDL) model suggest a positive long-run relationship between trade openness, terms of trade, and regulatory quality with export growth, while a negative relationship exists between inflation and export growth. Cointegration and error correction tests confirm a long-run equilibrium relationship. The study concludes that increased trade openness enhances Uganda's export activities by opening new markets, attracting investment, and improving competitiveness, while favorable terms of trade strengthen foreign exchange earnings and economic stability. Furthermore, improved regulatory quality facilitates easier and more attractive export activities, whereas persistent inflation undermines export profitability and economic predictability. Based on these findings, the study recommends that the government strengthen participation in regional trade blocs, pursue favorable trade agreements, improve regulatory frameworks, and adopt policies to maintain low inflation, ensuring the sustainability and growth of Uganda's exports in the global market.