Remittances and Economic Growth in Uganda (1993-2017)

ABSTRACT 

A booming interest in the topic of Diaspora remittances has developed over the past few years on the part of academics, donors, international financial institutions, commercial banks, money transfer operators, microfinance institutions, and policy makers. The surge of remittances to countries of origin in the last two decades, exceeding aid and foreign direct investment (FDI) to developing countries, has reignited debate on their development potential in receiving countries. Alongside the interest in remittances, there is also growing recognition of the importance of transnational practices in shaping the relationship between remittances and economic growth. The main objective of this study was to examine the relationship between remittances and economic growth in Uganda (1993-2017). Specific objectives: To investigate the long run relationship between remittances on Economic growth in Uganda (1993-2017), To examine the effect of remittances and economic growth in Uganda (1993-2017). The data used was sourced from UN data, Word Bank, BOU for the period 1993 to 2013. Augmented Dickey- Fuller (ADF), Philip-perron (PP) tests were carried out on the variables and were found to non-stationary at level but stationary after first difference, The study employed co-integration to test the long run relationship between remittances and economic growth and regression analysis to examine the effect of remittances on economic growth, and from the discussion of the findings, it can be concluded that the remittances are the among the most significant factors influencing positively the economic growth in Uganda. Since the remittances have positive relationship with economic growth, therefore there is need to optimize the volume of remittances because the country with the high remittance level boosts the economy through domestic saving and in the long run investment and increased positive growth effects of remittances are most likely to occur when remittances are transmitted in formal channels, incentives that make remitting money using formal channels cheaper as compared to the informal ones should be provided.

TABLE OF CONTENTS

DECLARATION...........................................................................................................i

APPROVAL................................................................................................................ii

DEDICATION ........................................................................................................... iii

ACKNOWLEDGMENT ................................................................................................iv

TABLE OF CONTENTS ...............................................................................................v

LIST OF TABLES .................................................................................................... viii

LIST OF FIGURES ....................................................................................................ix

LIST OF ABBREVIATIONS/ACROYNMS........................................................................x

ABSTRACT............................................................................................................... xi

CHAPTER ONE:.................................................................................................. 1

INTRODUCTION................................................................................................ 1

1.0 Introduction........................................................................................................1

1.1 The Background to the study ...............................................................................1

1.1.1 Historical perspective:.......................................................................................1

1.1.2 Theoretical perspectives: ..................................................................................5

1.1.3 Conceptual perspectives: ..................................................................................7

1.1.4 Contextual perspectives:.................................................................................11

1.2 Statement of the problem ..................................................................................14

1.3 Purpose of the study .........................................................................................15

1.4 Specific objectives:............................................................................................15

1.5 Research questions .........................................................................................16

1.6 Research Hypotheses ........................................................................................16

1.7 Scope of the study: ...........................................................................................16

1.7.1Geographical Scope .........................................................................................16

1.7.2 Content scope ................................................................................................16

1.7.3 Time scope ....................................................................................................16

1.8 Significance of the study:...................................................................................16

1:9 Operational definitions of key terms ...................................................................17

CHAPTER TWO ................................................................................................ 18

REVIEW OF RELATED LITERATURE ................................................................ 18

2.0 Introduction:.....................................................................................................18

2.1 Theoretical review.............................................................................................18

2.1.1 Neoclassical Growth Models ............................................................................18

2.1.2 Two gap model of economic growth ................................................................19

2.1.3 The Harrod Domar Model:...............................................................................20

2.1.4 Endogenous growth........................................................................................22

2.2 Related literature: .............................................................................................23

2.2.1The trend of remittance in Uganda ...................................................................23

2.2.2 The trend of Economic growth in Uganda ........................................................24

2.2.3 Remittance and Economic growth Relationship.................................................27

2.3 Related studies .................................................................................................28

2.4 Research Gap....................................................................................................32

CHAPTER THREE ............................................................................................. 33

RESEACH METHODOLOGY .............................................................................. 33

3.0 Introduction......................................................................................................33

3.1 Theoretical framework.......................................................................................33

3.2 Model specification:...........................................................................................35

3.3 Research Design ...............................................................................................36

3.4 Data Type and Sources: ....................................................................................37

3.5 Data analysis: ...................................................................................................37

3.6 Ethical considerations:.......................................................................................39

CHAPTER FOUR............................................................................................... 40

DATA PRESENTATION, ANALYSIS AND INTERPRETATION OF RESULTS....... 40

4.0 Introduction......................................................................................................40

4.1 Data preliminary testing.....................................................................................40

4.2 Unit Root Test Results Using the ADF test...........................................................42

4.3 Co-Integration Test Results................................................................................45

4.3.1 Unrestricted Co-integration Rank Test (Trace)..................................................45

4.4 Regression Analysis of the variables under study.................................................47

CHAPTER FIVE ................................................................................................ 50

DISCUSSIONS, CONCLUSIONS AND RECOMMENDATIONS ........................... 50

5.1 Discussions of Findings ......................................................................................50

5.3 Policy Recommendations ...................................................................................52

5.4 Contributions to Knowledge ...............................................................................53

5.5 Limitations of the Study.....................................................................................54

5.6 Suggestions for further research ........................................................................54

REFERENCES........................................................................................................56