The study was carried out to find out the relationship between the level of inflation and the level of economic growth in Uganda between 1980 and 2016. The study used the expostfacto research design and descriptive correlation survey design. The researcher used annual statistical records about inflation rate as measured by Consumer Price Index (CPI) and growth rate. These documents were obtained from the bank of Uganda, Uganda Bureau of Statistics (UBOS), and World Bank. The data were analyzed using STATA. Regression analysis was used to determine the strength of the relationship between inflation and economic growth in terms of Gross Domestic Product (GDP). The Pearson’s correlation coefficient (r) was computed to determine the nature of the relationship between the level of inflation and economic growth rate. It was observed that there is no significant relationship between the level of inflation and the level of economic growth in terms of Gross Domestic Product (GDP). The coefficient of determination (R2) was 11% which means that inflation explains 11% of the variation in economic growth. This implies that other predictor variables explain the variation in economic growth apart from inflation. This study recommends that the government of Uganda should put up structural reforms to minimize on inflation since it has a negative impact on long-run economic growth. Therefore, the Government of Uganda should find ways of increasing foreign exchange inflow and minimize foreign exchange outflow. This can be achieved through the allocation of more funds to the agriculture sector, provide favorable investment climate, and give more favors to the local investors.
Authored by:
Isaac Mokono Abuga, PHD
Sauda Nakibuli
