Inflation and Economic Growth in Uganda from 1976 to 2016

ABSTRACT The existence and nature of a link between inflation and Economic growth has been the subject of considerable interest and debate. High and sustainable Economic growth and low inflation are two of the main objectives of macroeconomic policy. Hence, if high inflation is harmful for an economy and low inflation is beneficial, then it is reasonable to ask, what is the optimal level of inflation for an economy? In general, is there any link between inflation and Economic growth? In this thesis, we estimate the relationship between inflation and Economic growth by studying their co-integrated relationship using the error correction model. After estimating this link, we turn to estimate the threshold level of inflation. The results indicate that there exist a positive long-run relationship between inflation and Economic growth in Uganda.