Assessment of determinants of national savings in Uganda

Abstract

Savings have always figured prominently in both theoretical analysis and policy design in both developed and developing economies. This prominence emanates from their assumed direct theoretical link to future economic growth and current expenditure levels via its link to consumption. Early theories of economic growth emphasized the role of savings as a source of capital accumulation and, hence, growth. Developing countries that are doing well in terms of growth, one cannot rule out the fact savings has got a role to play. It was important to identify the possible determinants of national savings in Uganda. Thus, this dissertation reports the factors affecting national savings in Uganda using the Ordinary Least Square (OLS) regression and Vector Error Correction Model (VECM). The time series dataset used was for the period 1983 to 2017. The results suggest that Uganda’s inflation rate, government expenditure, GDP per capita and real GDP had statistically significant effect on the national savings in Uganda. Inflation rate and real GDP have a negative and statistically significant effect on national savings in the long run. GDP per capita and government expenditure have a positive statistically significant impact Uganda’s national savings These results are important for trade policy formulation in order to ensure that Uganda’s national savings potential is increased so as to enhance economic growth. The study recommends that government should consider enforcing policies that enhance income since it plays a major role in increasing savings so as to facilitate economic growth.