The Impact of Fiscal Policy on the Level of Economic Growth of Uganda (2005Q2-2012Q2)

Abstract

The main objective of the study was to find out the impact of fiscal policy on the level of economic growth of Uganda. (2005Q2 - 2012Q2).The variables used in this study were GDP growth rates, government expenditure, taxation and public debt and their data was analyzed in quarters. The specific objectives were; to find out the impact of taxation on the level of economic growth in Uganda, to find out the impact of government expenditure on the level of economic in Uganda and to find out the impact of public debt on the level of economic growth in Uganda.

Diagnostic tests of normality, stationarity, serial correlation and multicollinearity were used on the variables estimated in the model. The variables were normally distributed. However, they were transformed into their logarithm forms to induce higher normality. ADF statistic was used to test for stationarity. Variables had to be differenced once to make them stationary at all level of significance. There was no serial correlation on the differenced variables and there was no presence of multicollinearit

The results showed that government expenditure and public debt have a negative effect on economic growth while taxation has a positive effect on economic growth. The results identified should prove useful to policy makers in Uganda in formulating expenditure and tax policies, as well as public debt management to ensure unproductive expenditures are curtailed, while at the same time boosting public investment.

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