Interest rate and inflation in Uganda (1998-2018)

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Kampala International University, College of Economics and Management
This study explored the relationship between interest rate and inflation in Uganda from the year 1998 to 2018. The origins of inflation have been amongst the most fiercely disputed subjects of economic analysis and political argument. However economists hold little or no monopoly over casual explanations. . Subsequently the origins of inflation are somewhat an enigma. However the argument will eventually boil down to two theories; Classical theory and Keynesian theory. Also interest rates. Interest rates have been around since the ancient civilizations. Interest rate is the rate at which interest is paid by a borrower for the use of money that they borrow from a lender (brealey et al, 2001). The need for interest rates arose from societies that started to build cities and farm the land, instead of following the herds like their hunter-gatherer ancestors. The researcher used secondary data from the Central bank of Uganda and the data ranged from the year 1998 to 2018. Data analysis was made using SPSS and MS Excel. The analysis majored on three tests and these included; normality test, stationary test and linearity test. The findings made showed that there is a negative relationship between interest rate and inflation, this means that when interest rate is high inflation is low. The researcher recommended the government to solve inflation by using measures like advocating for price controls, wage freeze among others.
Research Dissertation Submitted to the College of Economics and Management in the Department of Economics and Applied Statistics in Partial Fulfillment of the Requirement for the Award of Bachelor’s Degree of Arts in Economics of Kampala International University
Interest rate, Inflation, Uganda