ABSTRACT
The main objective of the study is to examine the impact of real exchange rate and inflation
on private investments in Uganda. The two objectives were to determine the effect of real
exchange rate on private investment; to determine the effect of inflation rate on private
investment. The study used Real exchange rate, Inflation rate, Bank credit, Foreign direct
investment, Public investment and trade as the determinants of private investment using
secondary data for a period of 1990-2014 gathered from the world bank database. Analysis
was carried out using a combination of both correlation and an ordinary least squares
multivariate regression model. The data shows that the level of private investment has
steadily been increasing for the 24 -year period considered in this study. Furthermore, the rate
of inflation in Uganda has been quite irregular though averagely stable in the recent years
with some slight movements up and down. Additionally, the real exchange rates have been
decreasing though at a rather irregular rate for between 1990 and 2014. The results of the
regression analysis show that there exists very significant negative effect of real exchange
rate on private investment in Uganda. Further analysis indicates that there exists a negative
and significant effect of inflation rate on private investment after log transformation in
Uganda. The study concludes that inflation is very insignificant in explaining the observed
trend in private investment. Thus, an increase in inflation may lead to a decrease in private
investment. The study further concludes that there is a very significant negative effect of
overall real exchange rate on the level of private investment in an economy. In other words,
an increase in the average value of real exchange rate in the economy is expected to result
into a decrease in the average level of private investment in the economy. Since the results
reveal that mild changes in the overall rate of inflation have got a stimulatory effect on
private investment, the study recommends that it is imperative for the policy makers to adopt
structural reforms that will keep the inflation rate in check so as to stimulate the economy.
Furthermore, due to the very significant effect of the real exchange rate (price level) on
private investment in Uganda, the study recommends that policy makers ought to adopt
strategic and systematic that would prevent the exchange rates from escalating through
strategies that would bring more foreign currency into the economy since its impact on
private investment can easily be felt. The study also recommends that policy makers should
formulate competition policies within the Ugandan trade sector as this will not only help
reduce fake goods in the market, but also help expand access to finance for private investors
as this will bring more money in circulation, offer wider choices of products, and encourage
better services hence economic growth of the country.
M., A (2022). Real Exchange Rate, Inflation Rate And Private Investments In Uganda (1990-2014). Afribary. Retrieved from https://tracking.afribary.com/works/real-exchange-rate-inflation-rate-and-private-investments-in-uganda-1990-2014-2
M., ADAM "Real Exchange Rate, Inflation Rate And Private Investments In Uganda (1990-2014)" Afribary. Afribary, 06 Oct. 2022, https://tracking.afribary.com/works/real-exchange-rate-inflation-rate-and-private-investments-in-uganda-1990-2014-2. Accessed 31 Aug. 2024.
M., ADAM . "Real Exchange Rate, Inflation Rate And Private Investments In Uganda (1990-2014)". Afribary, Afribary, 06 Oct. 2022. Web. 31 Aug. 2024. < https://tracking.afribary.com/works/real-exchange-rate-inflation-rate-and-private-investments-in-uganda-1990-2014-2 >.
M., ADAM . "Real Exchange Rate, Inflation Rate And Private Investments In Uganda (1990-2014)" Afribary (2022). Accessed August 31, 2024. https://tracking.afribary.com/works/real-exchange-rate-inflation-rate-and-private-investments-in-uganda-1990-2014-2