Exchange Rate and Gross Domestic Product of Uganda 1990- 2010.

ABSTRACT

The objective of this study was to investigate the effects of exchange rate on gross domestic product in Uganda from 1990 to 2010. The factors investigated upon included; to establish the trend and growth rate of exchange rates in Uganda 1990-2010.To examine the trend and growth rate of GDP in Uganda between 1990-2010.To find out the relationship between changes in the exchange rate and Uganda’s GDP between 1990-2010, The researcher used regression analysis to determine the relationship between exchange rate and the level of GDR. Analysis was based on HO: that states that there is no significant relationship between exchange rate and GDP. Computer package like STATA was used in estimation of the regression models. The study was based on absorption theory. The findings of the study were as follows: exchange rate has been increasing by 620.8 shillings. GDP has been slightly increasing by 0.012 million shillings. The depreciation of Exchange Rate favors the growth in Gross Domestic Product of Uganda. R2 = 0.19 and this implies that Exchange rate explains 19% of the variation in GDP. Since exchange rate explains only 19% of the variation GDP, it means that there are other determinants of GDP that explains remaining 81%. R-value was -0.4377 and this signifies that there is a negative correlation between exchange rate and GDP. From the model specification, the gradient was -3.9956 which means that, a unit increase in exchange rate influences GDP by - 0.39956. Conclusions. Exchange rate fluctuations affect the general GDP level in Uganda. Therefore, whenever there is fluctuation or exchange rate volatility, there will also be fluctuations of output. This discourages investors, make planning and economic forecasting difficult. Therefore, in order to encourage investors, and to promote people’s welfare in Uganda, there is a need to reduce exchange rate fluctuations so as to allow relative price stability in the country. Recommendations from the study were; need to increase Government revenue and reduce the deficit budget to stabilize the exchange rate, increased foreign exchange inflow and reduce its outflow through increased exports and reduction of repatriation of profits by foreigners.

TABLE OF CONTENTS

Chapter Page

Declaration A

Declaration B ii

Approval sheet iii

Dedication iv

Acknowledgement v

Table of contents vi

List of tables viii

List of Graphs ix

Acronym x

Abstract xi

One THE PROBLEM AND ITS SCOPE

Background of the study 1

Statement of the Problem 3

Purpose of the Study 4

Research Objectives 4

Research Questions 4

Hypothesis 4

Scope 4

Significance of the Study 5

Operational Definitions of Key Terms 5

Two LITERATURE REVIEW

Review of Related Literature 7

Theoretical Perspectives. io

Related Studies io

Three METHODOLOGY

Research Design 14

Research Popuiation 14

Sample Size 14

Sampling Strategies 14

Research Instrument 14

Data Gathering Procedures 14

Data Analysis 15

Ethical Considerations 16

Limitations of the Study 16

Four PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA 17

Five FINDINGS, CONCLUSION AND RECOMMENDATIONS 27

Finding of the study 27

Conclusion 28

Exchange rate recommendation 28

Areas for further research 31

References 32

Appendices

Appendix I - Transmittal Letter 36

Appendix II - Transmittal letter for respondents 37

Appendix III — Clearance from Ethics Committee 38

Appendix IV - Research Instrument 39

Appendix V - Proposed Data Presentation 40

Through Tables /Graphs

Appendix VI - Proposed Budget 41

Appendix VII - Time Frame 42

Appendix VIII- Researcher's Curriculum Vitae 43

Appendix IX- Analyzed data 45