Private investment and economic growth in Uganda: an empirical investigation: 1985 -2015.

Abstract

Private investment in Uganda has been identified to be moving on a downward trend since the 1980’s and the main goal of the study was to utilize time series data to analyze the extent to which private investment contributed to growth in the period between 1985 and the year 2015. Other objectives of the study were to empirically investigate the factors that affected private investment during the period under review and whether there was any relationship between growth and private investment and the impact this had on the growth of the economy. The data used in the study was obtained from various sources like the World Bank and Statistical Abstracts and the International Financial Statistics (IFS). Various tests were conducted to arrive at reliable results. These included unit root and cointegration, autocorrelation and heteroskedasticity tests. The results show that private investment in Uganda was affected by various factors with public investment and changes in domestic credit having a very strong relationship with private investment. The results also show that although changes in the Gross Domestic Product had a positive significant effect on the level of private investment, there was no causality between the two variables. Most of the other variables considered in the analysis conformed to economic theory on the relationship between them and private investment. This been the case, what is required is for the concerned authorities to look for ways of improving the current scenario in order to promote private investment and hence economic growth. This partly can be achieved through maintaining a stable investment environment and a favourable political climate.