Department of Economics and Energy

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Browsing Department of Economics and Energy by Author "Ayebale, Job"

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    Effects of Trade Openness on the Economic Growth of Uganda.
    (2024) Ayebale, Job
    Economic growth plays an important role in improving the quality of life in an economy. This study focuses purposely on examining the effect of Trade Openness on economic growth in Uganda. The study objectives are; to examine the short-run effects of trade openness on the economic growth of Uganda, to examine the long-run effects of trade openness on the economic growth of Uganda, to examine the impact of interest rate on the economic growth of Uganda, to examine the influence of exchange rate on the economic growth of Uganda, and to establish the contribution of Foreign Direct Investment on the economic growth of Uganda. The study adopted a causal research design and used time series of secondary data obtained from World Bank indicators from the period 1986 to 2021. The study variables include trade openness, foreign direct investment, Interest rate, real exchange rate, Inflation, total labor force, capital formation as the independent variable and gross domestic product as the dependent variable. The study uses multivariate time series econometric techniques of the Autoregressive Distributed Lag (ARDL) model as the most reliable and suitable estimation technique because it is suitable for relatively small samples and can be employed, whether the underlying series are integrated of order zero [I(0)], order one [I(1)] or mixed order to examine the effect of the identified determinants on gross domestic product in Uganda for the period under study. This was also subject to a diagnostic tests aimed at verifying the validity of the econometric model estimation results for the period under study. The results show that in the short run Interest rate, Real exchange rate, and Capital formation have a significant negative effect on GDP growth. However, in the long run, the Real exchange rate and total labour force exhibits a positive significant effect on GDP growth, and on the contrary interest rate exhibits a negative significant effect on GDP growth. Finally, using the ARDL Regression consisting of the robust standard error results conclude that depreciation of the foreign currency, total labor force, and capital formation significantly impact positively on Uganda’s GDP and appreciation of the foreign currency brings about a negative effect on the Economic growth whereas Trade openness and FDI exhibit a positive insignificant effect on GDP and then Interest rate together with Inflation exhibit a negative statistically insignificant effect on GDP. Among the recommendations there is a need to expand Uganda’s exports with more emphasis on value addition as a way of exporting products and discourage those that are not value-added as this affects price fluctuation on the international market.