Effect of Manufactured exports on economic growth in Uganda (1994Q1-2018Q4)

Abstract

The importance of exports in stimulating economic growth is well acknowledged in both past and recent literature. Results are however mixed and therefore inconclusive on the composition of exports that contribute to economic growth. This study therefore aims at examining the effects of manufactured exports on economic growth in Uganda. Specifically, the study analyzed the trend of manufactured exports in Uganda, establishing both the short and long-run relationship between manufactured exports and Economic growth in Uganda. The study uses quarterly second time series data obtained from World Development Indicators of 2019. The auto regressive distributed lag estimation approach is used based on the order of integration of the study variables and the presence of long run relationship. The study results show that, both in the short run and long run, in quarterly terms, manufactured exports have a significant positive effect on economic growth. In long run a 1 percent change in manufactured exports leads to 15.9 percent increase/decrease in GDP on average, holding other factors constant. However, in short run, manufactured exports have a marginally effect on GDP which is about 0.006 percent though statistically significant. Uganda’s manufactured exports still account for a very low portion (16.9%) of the total exports and most of these (77.9%) involve the use of low levels of technology, therefore its overall impact on economic growth is still weak. The study recommends enhancement of export incentives and subsidies to include provision of Credit facilities such as low-cost loans and financial guarantees for the manufacturing sector to further increase export levels. Secondly, reinforcement of bilateral and multilateral trade agreements to eliminate trade barriers. Thirdly, enhancing financing for domestic production through domestic investment and FDIs so as to boost the employment of factors of production including labour.

Keywords: Manufactured exports, Economic growth, Auto regressive Distributed Lag Model.