Export of coffee and economic growth in uganda (1985-2014)

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Kampala International University.School of Engineering Science
The study aimed at examining the relationship between coffee export earnings and economic growth in Uganda. The objectives were to determine the long run relationship between coffee exports earning and GDP in Uganda from 1985- 2014;To examine the trends of GDP and coffee export in Uganda; to determine the effect of coffee Export on GDP in Uganda from 1985- 2014.The first null hypothesis of the study was; there is no long run relationship between coffee export and economic growth and the second one was; there is no significant effect of coffee export earning on economic growth rate in Uganda for the period from 1985-2014. Ex Post factor research design was adopted. Unit root tests using the Augmented Dickey-Fuller tests were \ carried out to establish if the variables were stationary or not. The findings of ADF tests showed that all the study variables (GDP, coffee export, FDI, and interest rate, inflation and industry) that were non stationary at level became stationary after first differencing. Engel-Granger causality test was used to assess if there is a long run relationship between coffee export earnings and GDP in Uganda. The results from the Engel-Granger test indicate that there exists a long run relationship between the two variables understudy (ADF test statistic = -3.7633>absolute tabulated Engel-Granger statistic = -3.04).Furthermore, line graphs were used to establish the levels of variations that have existed in GDP growth rates and coffee export for the period under study. The findings of graph showed that the trends exhibited fluctuations from time to time. The overall regression model was well specified on the basis of the F-statistic (F 3.0576, p =0.0365) and the coefficient of determination (R-squared =45.8) that was reported by the data, an indication that the model was statistically significant. The study thus concluded that coffee export has a positive significant (p=0.003)effect on economic growth in Uganda as was observed from the regression output and that GDP and coffee export earnings have a long run equilibrium relationship. In line with the research findings, it was thus recommended that the government in power should diversify and promote exports in order to fully exploit the benefits of the sector and promote economic growth. To increase the impact of coffee export on economic growth, concerted effort should be directed toward productive channels of coffee in the economy so as to enhance sustainable economic growth through increased coffee exports. The study also recommended that modern production technologies of coffee must be quickly introduced to upgrade the traditional methods currently used and encouraging large commercial farms through providing new potential land and enforcing the implementation of different export incentives given for the exporters.
Thesis submitted to the college of economics and management in partial fulfillment of the requirements for the award of degree for master of science in statistics of Kampala International University, Kampala Uganda
Export of coffee, Economic growth