Inflation and Economic Growth in Uganda (2005-2016)

ABSTRACT The study sought to examine the relationship between Inflation and Economic Growth in Uganda (2005-20 16). The study objectives were; to establish the trend of inflation rate in Uganda (2005 to 2016), to examine the trend of economic growth in Uganda (2005 to 2016) and to investigate the relationship between inflation and economic growth rate in Uganda (2005 to 2016). A time series analysis was adopted and the use of quantitative techniques to analyze secondary data scientifically to critically conclude the research objectives. secondary data was enl lcc~ed {i~m different ministries, some quantification were necessary because of the need to tabulate data and use of statistical techniques to arrive at a dependable conclusion. Also inferences were drawn by fitting the regression model and testing for its significance using the t-test statistic The research also correlated the two variables and test for significance of the Pearson’s correlation coefficient of determination and finally time series analysis was done to test for stationarity between inflation and economic growth in Uganda for 12 years (2005-2016). The research covered twelve year’s time series of study that was, from 2005 to 2016. The study found out that there is a general decrease in inflation rate for the period studied (2005-2016), this might be due to government fiscal policy to control the money supply, exchange rates since when the foreign currency is stronger than a local currency it will lead to high circulation of money in the economy. It was rc~ ealcd thai economic growth rate has shown a general increase over the period studied (2()05-201() cxccpi for 2011 and 2016, this increase in economic growth rate is due to favorable balance of payment, high level oftechnology among others. The study found out that there is strong negative correlation between inflation rate and economic growth rate as reflected by the r-value ( r=-0.805 ) the strength of relationship between inflation rate and economic growth is determined by the coefficient of determination (120.648). This implies that the variation in economic growth is explained by inflation rate by 64.8 percent mean while the remaining percentages are explained by other variables, this reveal that the relationship between these two variables is strong. The study recommends that the government should also embark on strong fiscal policy to reduce the unnecessary money supply which can lead to inflation which may affect economic growth. The study also recommends the government to embark on industrialiy,ation. and modern icchnic~iie agricultural production since this area can employ large population resulting into high productivity hence economic growth.