Effects of Monetary Policy on Economic Growth in Uganda (1991-2014)

TABLE OF CONTENTS

DECLARATION

APPROVAL ii

DEDICATION ii

ACKNOWLEDGEMENTS iv

TABLE OF CONTENTS v

ABSTRACT Viii

C~A~TE~ ~ ~no~uon~unuou,u,unonnuouNuo~ueu,mun,a ~ 1

INTRODU~~ION ~ ~o~an~utnuuunuuuu,uuuqcnnuuuu~,n,o,u 1

1.0 Introduction

1.1 Background to the study

1.1.1 Current Macroeconomic environment in Uganda

1.2 Statement of the problem

1.3.1 General Objective

1.3.2 Specific Objectives

1.4 Research Hypotheses

1.5 Scope of the study

1.6 Significance of the study

1.7 Operational definitions of key terms

1.8 Limitation and delimitations of the study

1.9 CONCEPTUAL FRAMEWORK 

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

2.1 Conceptual Review

2.1.1 Monetary Policy

2.1.2 Economic Growth 

2.2 Theoretical Literature 

2.2.1 Classical Quantity Theory of Money

2.2.2 The Keynesian Theory

2.2.3 The Monetarist View on Monetary Policy

2.2.4 The classical theory of economic growth

2.2.5 The Neo-Classical theory of economic growth

2.3 CONTEXTUAL REVIEW

2.3.1 To find out the impact of monetary policy on economic growth.

2.3.2 To assess the relationship between money supply and economic growth..

2.3.3 To ascertain the effects of interest rates on economic growth

2.4 Review of related studies 

CHAPTER THREE

METHODOLOGY

3.0 Introduction

3.1 Research Design

3.2 Data and Source

3.3 Description of variables

3.4 Model specification

3.5 Testing for stationarity

3.6 Study Population

3.7 Sample Size and Composition

3.8 Sampling Technique

3.9 Data Collection Tools and Methods

3.10.1 Questionnaire

3.10.2 Interview Guide

3.11 Data Collection Procedure

3.12 Data Processing and Analysis

3.13 Reliability and Validity of Research Instruments 

CHAPTER FOUR

RESULTS AND PRESENTATION OF FINDINGS 

4.0 introduction

4.1. Effect of money supply on economic growth

4.2 Effects of interest rate~ on economic growth

4.3. Effects of the central bank and the government

4.4. Rate of GDP growth

4.5 Descriptive statistics

4.6 Model Estimation 

CHAPTER FIVE 

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS 

5.1 Introduction

5.2 Results of findings

5.3 Conclusions

5.4 Policy Recommendations

5.5 Suggestions for further research

APPENDIX A: RAW Data to be used for analysis 36

APPENDIX B: BUDGET 37

APPENDIX C: TIME FRAME OF THE STUDY 38

APPENDIX D: QUESTIONNARE FOR MANAGEMENT 39

VII

ABSTRACT

This study thrusts on the effects of monetary policy on economic growth in Uganda specifically to establish the effects of interest rate and money supply on Economic growth.It was based on time series data for the period of 1991-2014 obtained from the International Financial Statistics (IFS) which was employed for the analysis. Univariate analysis, Correlation matrix for the variables, Augmented Dickey Fuller test for stationarity, Normality tests and finally the model estimation. 7’ The findings revealed that money supply has a positive significance on GDP. However, interest rate has a negative effect statistically insignificant at 5% level of significance. That is to say as Money increases also GDP increases, however, increase in interest rate reduces GDP. This is because investments rely on the rate of interest, High interest rate makes borrowing expensive to the investor. Thus reduced investments leads to reduced GDP.The government should explore rational mechanisms of stimulating increased demand through money supply since it has emerged as a key element that promotes economic growth. Secondly the government and the concerned bodies should be in position to regulate the amount of interest rates charged to the borrowers so as not to scare borrowers from borrowing a~ it constrains the rate of growth of the economy.