Effects of monetary policy on economic growth in Uganda (1991-2014):
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Date
2018-08
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Kampala International University, College of Economics and Management.
Abstract
This study thrusts on the effects of monetary policy on economic growth in Uganda
specifically to establish the effects of interest rate and money supply on Economic
growth.
It was based on time series data for the period of 1991-2014 obtained from the
International Financial Statistics (IFS) which was employed for the analysis. Uni-variate
analysis, Correlation matrix for the variables, Augmented Dickey Fuller test for
stationary, Normality tests and finally the model estimation.
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The findings revealed that money supply has a positive significance on GDP. However,
interest rate has a negative effect statistically insignificant at 5% level of significance.
That is to say as Money increases also GDP increases, however, increase in interest
rate reduces GDP. This is because investments rely on the rate of interest, High
interest rate makes borrowing expensive to the investor. Thus reduced investments
leads to reduced GDP.
The government should explore rational mechanisms of stimulating increased demand
through money supply since it has emerged as a key element that promotes economic
growth. Secondly the government and the concerned bodies should be in position to
regulate the amount of interest rates charged to the borrowers so as not to scare
borrowers from borrowing a~ it constrains the rate of growth of the economy
Description
a research report submitted to the department of economics and statistics in partial fulfillment of the requirement for the award of a degree of bachelors of arts in economics of Kampala international university.
Keywords
monetary policy, economic growth