Inflation And The Cost Of Living In Uganda

ABSTRACT

This study focused on inflation and cost of living (measured by the annual public expenditures in USD) in Uganda (1996-2011), its objectives were: to establish the trend of inflation in Uganda (1996-20 11), to establish the trend in the cost of living as broken down by public expenditures on health, education and agric., vet., and forestry. The hypothesis of the study was there is no significant relationship between inflation and cost forestry of living.

Time series analysis such as regression analysis, correlation analysis and non parametric analysis was used. The trend of inflation and cost of living showed a general increase. Using the correlation, regression analyses, there was a weak positive correlation between inflation and each of three expenditures that is 0.0282, 0.0404 and 0.2725 for expenditures on health, education, agric., vet., and respectively at 0.05 level of significance. Regression of inflation and cost of living revealed there is no significant relationship between the variables. Stationarity was tested and found that both inflation and cost of living broken by expenditures on health, education, agric., Vet., and forestry have trend by using ACF and PACF. In conclusion therefore both inflation and cost of living have a general increase as seen by the positive relationship between inflation and cost of living which agreed with Chaudhary (1995), Kenny and Mcgettigan (1997) and Bonato (2007) which explains that the variation in consumer price index arc positively related with cost-push factors. This study also supported the theory of cost push inflation since it has proved that increases in expenditures of health, education and agriculture was partly due to inflation tendencies.