Exchange Rate and Gross Domestic Product in Uganda (2003 — 2012).

ABSTRACT

This research study was about Exchange Rate and Gross Domestic Product (GDP) and it was conducted in Uganda. This research study was guided by three objectives, that is, to determine the level of exchange rates in Uganda (2003 — 2012), to determine the level of GDP in Uganda (2003 — 2012), and to establish whether there is a relationship between exchange rates and GDP

in Uganda (2003 — 2012).

The research hypothesis was “There is no relationship between exchange rates and GDP growth rates in Uganda (2003 — 2012)” Therefore time series analysis such Correlation and regression analysis were used in analyzing data.

The researcher found out that the level of exchange rate in Uganda (2003 — 2012) has been increasing though with some fluctuations. Generally, the exchange rates in Uganda have been increasing from 92.2 in 2003 to 124.6 in 2013; also he found out that the GDP growth rates had

some ups and downs of fluctuations with the highest GDP rates in Uganda was in 2008.

Concerning the third obj ective of the study, this was concerned with establishing relationship between exchange rates and GDP in Uganda (20013 — 2012). In this, the researcher found out that there is a negative correlation between exchange rates and GDP in Uganda (20013 — 2012), with (r -0.470). This led to the rejection of the null hypothesis. The negative relationship

between exchange rates and GDP growth rates indicated that increasing exchange rates leads to decreasing GDP growth rates in Uganda.

The exchange rates in Uganda have been increasing showing a continued loss of value of Ugandan currency. This is not good as the real purchasing power of domestic currency reduces comparably to international currency. However, continued depreciation also makes the imports

expensive hence promoting domestic production of goods and services. The results indicated that the GDP has been increasing though at a decreasing rate. Uganda experienced the highest growth rate in 2006 and the least in 2013. In finding relationship, it also shown that the effect of exchange rate on GDP growth rates in

low. This means that there are other factors affecting GDP in Uganda. It however important to note that if Uganda is to improve GDP growth rates, there is a need to maintain exchange rates low to match economic growth

TABLE OF CONTENTS

DECLARATION

APPROVAL

DEDICATION

ACKNOWLEDGEMENT

LIST OF ACRONYMS

LIST OF FIGURES

LIST OF TABLES

TABLE OF CONTENTS

ABSTRACT

CHAPTER ONE

INTRODUCTION 1

1.0 Introduction 1

1.1 Background of the Study 1

1.2 Problem Statement

1.3 General Objectives of the Study 3

1.3.1 Specific Objectives 6

1.4 Research Questions 6

1.5. Hypothesis 6

1.6 Scope of the Study 6

16.1 Content Scope 6

1.6.2 Geographical Scope 6

1.6.3 Time Scope 6

1.6.4 Theoretical Scope 7

1.7 Significance of the Study 7

1.8 Operational Definitions of Key Terms 7

CHAPTER TWO 8

LITERATURE REVIEW 8

2.0 Introduction 8

2.1.1 Theoretical Review 8

2.2 Conceptual Framework 10

vi

2.3.0 Related Literature 11

2.3.1 Exchange Rate

2.3.2 Gross Domestic Product in Uganda is

2.3.3 Relationship between Exchange Rate and Gross Domestic Product 19

2.4 Related Studies 22

CHAPTER THREE 25

METHODOLGY 25

3.0 Introduction 25

3.1 Research Design 25

3.2 Data Collection Instruments 25

3.3 Sources of Data 25

3.4 Validity and Reliability of Data 25

3.5 Data Processing and Analysis 26

3.6 Limitations of the Study 27

3.7 Ethical Consideration 27

CHAPTER FOUR 28

PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA 28

4.0 Introduction 28

4.1 The Level of Exchange Rate in Uganda (2003- 2012) 28

4.2 The Level of Gross Domestic Product (GDP) in Uganda for the Year (2003 — 2012) 30

4.3 Relationship between Exchange Rate and Gross Domestic Product in Uganda in the Years (2003 —

2012) 33

CHAPTER F1VE 38

SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS 38

5.0 Introduction 38

5.1 SUMMARY OF FINDINGS 38

5.2 The Level of Exchange Rate in Uganda (2003- 2012) 38

5.3 The Level of Economic Growth (GDP growth rate) in Uganda (2003 —2012) 38

5.4 Relationship between Exchange Rates and Economic Growth (GDP rates) in Uganda (2003 — 2012)

39

5.6 CONCLUSIONS 40

5.7 RECOMMENDATIONS

VI

5.8 AREAS FOR FURTHER RESEARCH .41

REFERENCES 42

APPENDICES 45

Appendix I: Introduction Letter 45

Appendix II: Exchange Rate and GDP Data (2003-20 12) 46

Appendix III: DATA ANALYSIS 46

Appendix IV: RESEARCHER’S CURRICULUM VITAE 53