Foreign direct investment and net export as correlates to foreign exchange rates Uganda (1990 - 2014):
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Date
2016-03
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Kampala International University, College of Economics and Management.
Abstract
The study set to examine the relationship between FDI, net exports and foreign exchange rates in
Uganda between 1990 —2014 and it was carried out on the three research objectives which included to:
establish the relationship between FDI and foreign exchange rates in Uganda, establish the
relationship between Net exports and foreign exchange rates in Uganda and to show the effect of
FDI and Net exports on foreign exchange rates in Uganda.
The study adopted a qualitative descriptive correlational research design involving both
quantitative and qualitative approaches in data collection. 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 collected from World Bank reports, bank of Uganda
international monetary fund data sheets and United Nation Commission on Trade and
Development data sheet among others.
On the trend of foreign exchange rate, the researcher found a general increase in foreign exchange
rate of Uganda between the periods of 1990 to 2006. The only slight decrease in the value of
Ugandan export rate was witnessed between 2006 to 2007, then a slight decrease between 2009
2010 and after a general increase between a period of 2010 to 2014.
Under the trend of foreign direct investment, the researcher got a slight decrease in Foreign Direct
investment in the period between 2011 to 2012, and a total decrease between 2012 to 2013 and a
general increase between 2013 to 2014. The increase in FDI rate could have been attributed to the
peaceful political climate, and reduction in inflation among others.
The researcher went ahead to determine the mean values of the variables whereby it ‘was found
out that Foreign Exchange Rate had a mean of 413.552, Net Exports had a mean of 16.692 while
FDI had a mean of 62.86, as shown in the table in the mean column.
On the relationship between Net exports and foreign exchange rates in Uganda there researcher
found out that Net export is strongly related to foreign exchange rate, most of the points are close
to the fitted trend. This relationship is as a result of high flow of Net export level which leads to
low rate of foreign exchange.
The researcher used Pearson’s correlation coefficient to establish the strength of relationship
between net export and foreign exchange rate in Uganda whereby a very strong relationship
between the foreign exchange and Net export (r~ 0.9263) was seen and there is also a very strong
foreign exchange and FDI (r = 0.8655) the strength of relationship between FDI, net export and
foreign exchange rate is determined by the coefficients of determination which the figure above
shows that there is a very strong relation between the DV and the IVs. Under regression analysis
ofFDI, Net export and foreign exchange rate in Uganda, the researcher used P-Value test analysis.
The researcher recommended that in order to encourage foreign exchange rate, policymakers
should encourage FDI and exchange rate to make Uganda a serious contender for Foreign direct
exchange and net export, the country needs to be modernly equipped with well-functioning
infrastructure and effective vocational and skill training institutions suited to investors’ generic
human resource needs. With regard to country development policy, investing in productive
infrastructure is considered to be an instrument to improve the foreign exchange rate ofthe country.
Description
a dissertation submitted to the college of economic and management in partial fulfillment of the requirements for the award of bachelor’s degree of economics and applied statistics of Kampala international university.
Keywords
foreign exchange rates, net export, Foreign direct investment