The impact of trade liberalization on economic growth in Uganda (2009-2019)

Abstract

The study explores the impact of trade liberalization on economic growth in Uganda for the period of 2009-2019. The study was motivated predominantly by the fact that Uganda has one of the most open trade regimes in Africa, with on-going reforms, then subsequent liberalization of the economy (trade) and specifically the on-going multilateral, Bilateral and Plurilateral trade negotiations that have stimulated economic growth. Furthermore, the economic growth performance has been impressive with real GDP per capita doubling by the late 2000s in comparison with the 1990s. The objective of this study is to empirically investigate the impact of trade liberalization on economic growth in Uganda for the period 2009-2019 in a multivariate framework including tariff and non-tariff barriers and trade openness as regressors. Using secondary data collection methods to generate data for the study, Computer scientific packages of OLS and E-Views were used for data analysis. The impact of trade liberalization on economic growth was estimated using Vector Error-Correction modeling (VECM). For this study the neo-classical growth model was applied, using time series macroeconomic data spanning the period 2009-2019, the study employed the Autoregressive distributed Lag bounds test to cointegration and the Toda and Yamamoto Granger causality tests to determine the impact. The results show that trade openness has positive effects on economic growth both in the short and long run. Furthermore, they reveal a positive and strong complementary relationship between trade openness and tariff and non-tariff barriers in promoting economic growth. It is therefore recommended that, there should be provisions to promote policies that support trade openness as this arrangement is significant towards the overall welfare and economic growth of Uganda.