Browsing by Author "Abdirahman Abdi Nor"

Now showing 1 - 1 of 1
  • Thumbnail Image
    Item
    Statistical Modelling of Inflation Rate and Economic Stability in Uganda (1989-2022)
    (2024) Abdirahman Abdi Nor
    This study examines the impact of inflation rates on key indicators of economic stability in Uganda from 1989 to 2022, focusing on growth domestic product (GDP) growth rate, trade, balance of payments (BoP), and investment. Using a cross-sectional and ex-post facto research design, time series econometric techniques were applied to analyze the relationships between inflation and these economic variables. Descriptive statistics indicated a minor symmetry in the data, with average inflation rates at 6.33%, trade at 37.14%, BoP at -1.77%, investment at 2.94%, and GDP growth at 6.5%. Stationarity tests showed that all variables became stationary after first differencing, enabling the use of co-integration analysis. However, the results from the unrestricted co-integration trace rank test revealed no long-term relationship between inflation and economic stability. Regression analysis demonstrated that inflation had a moderate negative effect on GDP growth, accounting for 17.3% of its variability. Inflation also significantly impacted the balance of payments, contributing to 58.6% of its variation. The influence of inflation on investment was less pronounced, explaining only 10% of its change. In the short run, a statistically significant relationship between inflation and economic stability was observed, as confirmed by the Error Correction model(ECM) and bound tests. In the long run, inflation had a negative but statistically insignificant effect on Uganda’s economic stability. The findings highlight that inflation adversely affects economic stability, with more substantial impacts on the balance of payments and GDP growth. The study recommends policy measures to control inflation in order to promote long-term economic stability in Uganda.