A Statistical Evaluation of The Effect Of Public Debt On Gross Domestic Product Growth Rate in Uganda (1988- 2022)
Loading...
Date
2024
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
The purpose of this studywas to assess the impact of public debt on the GDP growth rate of Uganda from 1988 to 2022. It aimed at investigating the short-term and long-term correlations between public debt and economic growth, focusing on understanding how varying levels of public debt influence GDP growth over time. The study utilized a 34-year time-series dataset and incorporated macroeconomic factors such as inflation, exchange rates, and government expenditure that ensured a comprehensive analysis. The methodology involved descriptive analysis, trend assessment, and regression analysis, utilizing Ordinary Least Squares (OLS) regression that gauged the association between public debt and GDP growth rate, while controlling relevant variables like inflation, exchange rates, and government spending. The data's stationary was confirmed using the Augmented Dickey-Fuller (ADF) test, and the ARDL bounds testing approach was employed to identify long-term relationships between the variables. The findings indicated that public debt has a negative impact on Uganda's GDP growth rate in the long run, with external debt posing a more significant threat to economic growth compared to domestic debt. In the short term, the influence of public debt on GDP growth was more moderate but still noteworthy. The analysis suggested that surpassing specific thresholds of public debt can result in slower economic growth. Furthermore, inflation and exchange rates were identified as notable influencers of GDP growth during the study period. The study concludes that while public debt is essential for funding development projects, excessive accumulation can impede Uganda's long-term economic growth. To ensure sustainable growth, the results emphasized the need for prudent debt management and a balance between borrowing for development and maintaining debt sustainability. Policymakers are encouraged to implement strategies that prevent adverse long-term impacts on the economy.