Impact of export performance on economic growth in Uganda

Abstract

The Ugandan government has attempted to diversify the economy and address macroeconomic challenges but the country‟s export base has not expanded to the required levels as export performance has remained shaky, and the efforts and reforms have not yet yielded significant strides in widening the country‟s export base. The main objective of this study was to establish the effect of exports on economic growth in Uganda from 1980 to 2016. The data obtained from World Bank website (development indicators) were annual secondary time series. The study was based on the granger causality analysis and an extension of works by Bahmani-Oskooee and Alse (1993), Dutt and Ghosh (1996) and Xu (1996). The methodology adopted for this study included a single error correction model and granger causality analysis. Time series procedures that included testing for unit root using the two tests; ADF and PP unit root tests were carried out the granger causality analysis revealed a feedback effect between exports and economic growth while the error correction model revealed that exports, official development assistance, capital formation, taxes and Savings had significant effect on economic growth in Uganda. The model did not have any omitted variables or suffer from the problems of spurious regression, heteroscedasticity, multicollinearity and autocorrelation as shown by Ramsey RESET test, Breusch-Pagan / Cook-Weisberg test, VIF, and Breusch-Godfrey LM test respectively. The study recommended long run growth policies to be used by the government, implying that policies promoting exports would enhance economic growth. The creation of Export Processing Zones (EPZs) is hence recommended in order to promote exports in Uganda which would in turn enhance economic growth.