Effect of financial development on economic growth in Uganda

Abstract

Financial development is regarded as an engine of economic growth. However, limited attention is given to examining the effect of financial development on economic growth in Uganda. This study examines the effect of financial development on economic growth in Uganda using the ARDL bounds testing approach over the period 1983-2021. The results indicated that financial development has a positive and significant effect on economic growth in the long run while other control variables such as gross fixed capital formation, labour force, real interest rate, inflation rate, and government expenditure exhibited a significant effect on economic growth. The study recommends policies that are directed towards the development of the financial sector while supporting individual businesses by setting up an enabling environment that encourages investments both public and private which is viewed as one way of enhancing economic growth.