The role of fiscal policy on balanced growth in Uganda (1986-2016)

Abstract

In any country’s economy for both microeconomic and macroeconomic environments have a great role performance of fiscal policy. The study set out examines the influence and the role of fiscal policy on economic balanced growth in Uganda. Adopted of modern testing methods like unit root, time series, co-integration analysis and error correction model for investigating the relationship between fiscal policy instruments and economic balanced growth using quarterly data from 1986-2016 obtained from the world development indicators – World Bank Data. The result suggests that there exists a short (long) run relationship between GDP growth rate as endogenous variable and a set of fiscal policy instruments as exogenous variables like government tax revenue, government general expenditure, public work, government debts, gross capital formulation, unemployment level and inflation rate of consumer price index. The results of the study also show that fiscal policy instrument to changes in the balanced growth of the economy especially gross domestic product and economic policies both in the short and long run. The study also provides some instructive recommendations like development of tax policies to create incentives for poor, controlling budget and public expenditure for developmental issues and government making restructure fiscal policy in order to achieve an effective public sector. This will enhance also effective controlling unemployment level and inflation rate.