Analysis of the impact of public debt on economic growth of Uganda (1970-2019); using nonlinear ARDL model

Abstract

The overall objective was to determine the impact of public debt on economic growth of Uganda using non-linear ARDL model. The study specifically focused on establishing the relationship between external debt, domestic debt, population growth rate, inflation rate and economic growth. The study explained the summary (descriptive statistics) at the univariate level while pairwise correlation and Nonlinear ARDL technique were employed at bivariate level and multivariate level respectively. The ARDL bounds test revealed the presence of a long run relationship among the variables. The nonlinear ARDL model indicated that;one period lagged positive changes in domestic debt stock; negative changes, positive changes and one period lagged positive changes in external debt stock; Positive changes in POPR; negative and one period lagged negative changes in INFL influence economic growth. The study recommended that the government of Uganda should adopt local currency funding, only invest the borrowed money into productive activities and support the agricultural sector. The study concluded that Inflation rate, domestic debt stock, population growth rate and external debt stock influence GDP per Capita (economic growth).