Time series analysis of the relationship between consumption expenditure and economic growth in Uganda (1990-2022)

Abstract

Consumption expenditure is looked at as one of the main contributors to Uganda’s economic growth. The main aim of the study was to determine the relationship between consumption expenditure and economic growth in Uganda from 1990-2022. Using secondary data from the World Bank and OECD National accounts, the Ordinary Least Squares (OLS) multiple regression analysis was applied while investigating the relationship among the variables. The independent variables used when conducting the study were; final consumption expenditure, GCF, lending rates, and exports, while the dependent variable was Gross Domestic Product (GDP). The data findings established a positive and significant relationship between economic growth measured in terms of GDP and consumption expenditure, GCF, and exports. Whereas a negative and significant relationship was discovered between lending rates and GDP. The study hence recommended that; The government should continue investing in infrastructural projects to create more jobs and increase on people’s disposable income, therefore contributing to an increase in consumption expenditure and economic growth. Secondly, the government of Uganda should encourage producers to process raw materials into finished products before exporting them so as to add onto their value hence increasing cash inflow. Furthermore, the government should indulge in favorable multilateral trade agreements in order to reduce tariffs and non-tariff barriers for Ugandan exports. Lastly, promotion of PPPs by the government could potentially increase on the funding of large-scale infrastructure projects that stimulate economic growth in the short and long run.