Exchange rate and gross domestic product of Uganda 1990- 2010.

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Kampala International University, College of Economics and Management
The objective of this study was to investigate the effects of exchange rate on gross domestic product in Uganda from 1990 to 2010. The factors investigated upon included; to establish the trend and growth rate of exchange rates in Uganda 1990-2010.To examine the trend and growth rate of GDP in Uganda between 1990-2010.To find out the relationship between changes in the exchange rate and Uganda’s GDP between 1990-2010,The researcher used regression analysis to determine the relationship between exchange rate and the level of GDR. Analysis was based on HO: that states that there is no significant relationship between exchange rate and GDP. Computer package like STATA was used in estimation of the regression models. The study was based on absorption theory. The findings of the study were as follows: exchange rate has been increasing by 620.8 shillings. GDP has been slightly increasing by 0.012 million shillings. The depreciation of Exchange Rate favors the growth in Gross Domestic Product of Uganda. R2 = 0.19 and this implies that Exchange rate explains 19% of the variation in GDP. Since exchange rate explains only 19% of the variation GDP, it means that there are other determinants of GDP that explains remaining 81%. R-value was -0.4377 and this signifies that there is a negative correlation between exchange rate and GDP. From the model specification, the gradient was -3.9956 which means that, a unit increase in exchange rate influences GDP by - 0.39956. Conclusions. Exchange rate fluctuations affect the general GDP level in Uganda. Therefore, whenever there is fluctuation or exchange rate volatility, there will also be fluctuations of output. This discourages investors, make planning and economic forecasting difficult. Therefore, in order to encourage investors, and to promote people’s welfare in Uganda, there is a need to reduce exchange rate fluctuations so as to allow relative price stability in the country. Recommendations from the study were; need to increase Government revenue and reduce the deficit budget to stabilize the exchange rate, increased foreign exchange inflow and reduce its outflow through increased exports and reduction of repatriation of profits by foreigners.
A thesis presented to the school of postgraduate studies and research Kampala International University Kampala, Uganda in partial fulfillment of the requirements for the Degree Master of Arts in economics
Exchange rate, domestic product, Uganda