Analysis of Determinants of Export Performance in Uganda (1987-2017)

Abstract

Exports play an important role in Uganda’s economy, influencing the level of economic growth, employment and the Balance of Payments. Uganda has initiated several trade policy reforms aimed at promoting the export sector. However, Uganda’s share in total world exports is still very low. Given the central role of exports in the economy, it was important to identify the possible factors affecting export flows between Uganda and its trading partners. Thus, this dissertation reports the factors affecting Uganda’s exports using the Ordinary Least Square (OLS) regression and Vector Error Correction Model (VECM). The timeseries dataset used was for the period 1987 to 2017. The results suggest that Uganda’s inflation rate, Foreign direct investment inflows, real effective exchange rate and real GDP had statistically significant effect on Uganda’s exports. Inflation rate had a positive and statistically significant effect on exports in the short run and a negative statistically significant effect on exports in the long run. Real GDP had a negative and statistically significant effect on exports in the short run while Foreign direct investment inflows of Uganda had an immaterial effect (close to zero) on Uganda’s exports. Real effective exchange rate had a negative and statistically significant effect on Uganda’s exports in the long run as shown by the OLS results. These results are important for trade policy formulation in order to ensure that Uganda’s export potential is exploited so as to enhance economic growth.