Inflation and Trade Balance in Uganda

ABSTRACT The study set to investigate the impact of inflation on trade balance of Uganda from 1983-2014.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 coefficient 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 -0.021. 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.

TABLE OF CONTENTS

DECLARATION

APPROVAL ii

DEDICATION

ACKNOWLEDGEMENT iv

LIST OF ACRONMYS v

CHAPTER ONE 1

1.0 Introduction 1

1.1 Background of the Study 1

1.1.1 Historical perspective 1

1.1.3 Conceptual perspective 3

1.1.4 Contextual perspective 5

1,2 Statement of the problem 6

1.3 Purpose of the study 6

1.4 Objectives of the study 6

1.5 Research Questions 6

1.6 Hypothesis 7

1.7 Scope of the study 7

1.7.1 Geographical Scope 7

1.7.2 Theoretical Scope 7

1.8 Significance of the study 7

CHAPTERTWO 8

LITREATURE REVIEW 8

2.0 Introduction 8

2.1 Conceptual Review 8

2.2 Conceptual framework 12

Vi I

2.4 Empirical review ~14

2.4.1 Empirical findings on inflation rate ...........................14

2.4.2 Empirical findings of Balance of trade 17

2.5 Research Gap 21

CHAPTERTHREE 22

METHODOLGY 22

3.0 Introduction 22

3.1 Research Design 22

3.2 Data Type and Source 22

3.3 Data Processing and Analysis 22

3.4 Ethical Consideration 24

3.5 Limitations of the Study 24

CHAPTER FOUR 25

PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA 25

4.0 Introduction 25

4.1 Stationarity Test 25

4.2 Relationship between inflation and trade balance in Uganda from 1983~201~ 27

CHAPTER FIVE 30

Discussion, CONCLUSIONS AND RECOMMENDATIONS 30

5.0 Introduction 30

5.1 findings and Discussions 30

5.4 Recommendations 31

5.5 Areas of further study 32

REFERENCES 33

Appendix I: DATA SET 38

APPENDIX 2: RESEARCH CIRUCULAM VIT 39

APPENDIX III: TIME FRAME 40