Foreign trade and economic growth in Uganda

Abstract

Foreign trade is often considered vital for economic growth, yet its actual impact in Uganda remains uncertain. This study investigated the relationship between foreign trade and economic growth over the period 1990 to 2024, focusing on whether trade openness contributed significantly to output expansion. The objectives were to examine both the long‑run and short‑run effects of foreign trade on economic growth, while controlling for investment, inflation, and population growth. Annual time‑series data were obtained from the World Bank’s World Development Indicators. The analysis employed unit‑root tests, Johansen cointegration procedures, and an Error Correction Model within the ARDL framework to capture dynamic relationships. The results revealed that foreign trade openness was not statistically significant in either the short run or the long run. This finding implies that Uganda’s growth has been driven more by other macroeconomic factors, such as investment and demographic changes, than by trade. Policy should therefore emphasize strengthening domestic capacity, diversifying production, and reducing reliance on imports to achieve sustainable growth. Subject keywords: Economic Growth, Foreign trade, Uganda