Effects of money supply, foreign direct investment, education and exchange rates on the GDP growth for Uganda (1990-2018).

Abstract

The results of the study showed that money supply and education negatively affect economic growth in Uganda. Whereas the government, through the already established statutory bodies like Uganda investment authority, Uganda exporting and promotion authority, free-zones authority, Uganda revenue authority, among others; continues to strive to put a conductive climate to attract more foreign direct investment inflows in the country, creating tax free environment for investors, reducing the cost of electricity, landing fees, to mention a few, (Budget Speech, 2017/18), these have not yet delivered in terms of growing the economy. The Government needs to evaluate and determine why these strategies have not yielded the much needed growth and based on this evaluation, they need to revise and/ or change strategies for stimulating economic growth. The results of the study support the World Bank strategy of gradually increasing money supply to boost economic growth (World Bank, 2015) and also is in line with monetarists who believe that expansion of the money supply will end recessions and boost growth. Money supply is still viable strategy to induce demand in the economy which should, however, be applied in moderation to avoid inflationary pressures. The elasticity of real gross domestic product to money supply was 0.59 in the short run and 1.59 in the long run, it should be implied that a one percent increase in money supply increases economic growth by 1.59% and the money supply should be increased in tandem with economic growth otherwise it could lead to reduced prices and fall of the private sector.