The relationship between tourism and the economic growth of Uganda (a case study of 2001-2017)
Nakyejwe, Eron Hellen
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The study investigated the relationship of tourism and economic growth in Uganda for the period 2001-2017 using quarterly time-series data. In the global economy, tourism is one of the most noticeable and growing sectors. This sector plays an important role in boosting a nation’s economy To realize the study objective the study used tests such as Augmented Dickey-Fuller (ADF) for stationarity, Johansen test for cointegration, Log-log Model to check the existence of the long-run relationship between the variables, the unit root test results revealed that not all the variables were stationary. The co-integration test results revealed that there is co-integration among variables and variables such as Foreign Direct Investment, inflation, and Real Interest Rate had a significant relationship with the economic growth of Uganda in the long run. The results also showed that GDP had a positive relationship and statistically significant effect on tourism meaning that a 1% increase in the gross domestic product will lead to about 0.235% increase in tourism. This is because higher incomes of the country lead to more being pledge in the tourism sectors with and outside the country. Statistically, at a 5% level of significance, foreign direct investment, GPD, inflation consumer price, and real interest rate were found to be significant while the rest were not. Foreign Direct Investment is positive and statistically significant and it shows that a rise in foreign direct investments by 1% will lead to a rise in tourism by approximately 0.017%. We can therefore conclude that in Uganda, Tourism has a positive effect on economic growth in both the long run and short run. The study further concludes that there is a causal relationship between tourism and economic growth. The study recommends that the government should focus on the important determinant of economic growth in Uganda and that is Tourism since it has a direct relationship with economic growth, suggesting that an increase in tourism increases economic growth. Further that, legislators should focus on the policies with special emphasis on the promotion of tourism due to its great potential economic growth. An implication that more tourists coming into the country brings in income that is invested into productive activities such as infrastructural development like roads, hotels which are key to the increment in tourism earnings hence economic growth.