Effect of remittances on the economic growth of Uganda

Abstract

This study examined the effect of remittances on economic growth of Uganda. In the past few years, there has been a remarkable renaissance in the interest in remittances. This interest has undoubtedly been triggered by a striking increase in remittance flows: After years of relative neglect, they have been rediscovered as a potential source of development finance. Despite the increasing flows, there are conflicting views regarding their effect on economic growth. The optimists argue that remittances have a positive effect on economic growth whereas the optimists argue that they have a negative effect on economic growth. To examine the contradicting views, generalized least squares method of estimation is used for this particular study using panel data spanning from 1999-2018. Data was obtained from World Development Indicators; the data was then imported from excel to StataSE 15 for further analysis. The findings of the study show that remittances have a positive and significant effect on economic growth. Remittances do actually enhance economic growth. Other sources that account for economic growth of Uganda include foreign direct, trade openness and investment in physical capital. Therefore Uganda as a country should enact policies that favor the inflow of remittances into the economy hence enhancing economic growth and development in the long run.