Impact of Government Expenditure on Economic Growth in Uganda Q1 2008 - Q4 2017

Abstract

This study set out to examine the impact of government expenditure on economic growth in Uganda by disaggregating government expenditure into two components, that is; development expenditure and recurrent expenditure. The theoretical framework for the model was drawn from the neoclassical framework using a standard Cobb-Douglas production function. In line with empirical literature, the study also controlled for the effects of inflation and trade openness. To achieve the objective of the study, ARDL bounds approach to cointegration was adopted. Using this technique, three model specifications were estimated; one with both development and recurrent expenditure, the second with development expenditure removed from the model, and the last one where recurrent expenditure is dropped. This was done to check for robustness of the results. The study finds growth rate of government recurrent expenditure to have a significant positive impact on GDP growth rate while growth rate of development government expenditure is not significant in the long run.