Inflation And Trade Balance in Uganda

ABSTRACT The study set to investigate the impact of inflation on trade balance of Uganda from 1983-2O14~The study was guided by one objective of established relationship between inflation and trade balance in Uganda. The study adopted a longitudinal research design involving quantitative approach, Time series analysis was adopted and regression analysis to analyze secondary data collected from International monetary fund, Bank of Uganda and World Bank data sheets. The findings were that the inflation rate in Uganda has been increasing, though with some stagnations and fluctuations, The balance of trade was unfavorable over the last 32 years and there was a mix of ups and downs with the balance of trade still heating negative. The correlation coeffic~ient shows a weak negative relationship(r=-O,307) between inflation rate and trade balance and after Stationarity correction, a negative and insignificant relationship was observed also. The rate change of trade balance due to inflation rate is (B=-O.021), indicating that a unit increase in inflation rate reduces trade balance by -O~O21. The researcher recommends the government should encourage the local company to produce and export so that to improve the trade balance. Finally, the government should have the policy to limit the import goods, decrease the cost of transport and decrease the impact of oil price on import to avoid trade balance deficit.