The Causal Relationship between Population Growth and Economic Growth in Uganda

Abstract

This study analyzed the causal relationship between population growth and economic growth in Uganda by specifying a multivariate framework and the researcher employed the Johansen cointegration technique and the Vector Error Correction Model (VECM) to estimate the effect of the independent variables on the dependent variable in both the long run and short run; Ordinary least squares (OLS) method was employed to estimate the unknown parameters in a linear regression model and the Granger Causality test was done to test for the direction of causality. From the data analysis, going by the VECM results and the fact that the variables are cointegrated, the study concluded that there are both long run and short run influences on economic growth by population growth, gross capital formation, exports and labour in Uganda during the period of the study. The OLS estimation also found population growth to be negative and statistically significant at the 5 percent level of statistical significance. Thus, increase in population growth has a significant negative effect on economic growth in Uganda and therefore contributes negatively to the development of the Ugandan economy. The results of a pair wise Granger Causality test showed that population growth Granger causes economic growth in Uganda. It was concluded from the findings that economic growth and development in Uganda is responsive to population growth negatively and also that population growth is significant predictor of economic growth in Uganda. The study recommended that appropriate measures should be taken to curb this explosive population growth which may become endemic in the economy resulting in pervasive poverty, and a danger to sustainable development, and also population growth should be influenced to impact economic growth positively.