The impact of public expenditure on economic crowth in UGANDA for the period of 1990 - 2021

Abstract

This study investigates the impact of public expenditure on economic growth in Uganda using time series data for the period 1990-2021. The study employs the Autoregressive Distributed Lag (ARDL) model. We are particularly interested to the extent at which the government expenditure affects economic growth. We use the Augmented Dickey Fuller (ADF) unit root test and the co-integration analysis. We also employ the Autoregressive Distributed Lag model (ARDL) with error correction term to further examine the short- and long-run relationships. The ARDL bounds test shows the presence of long-run cointegration relationship between the variables. The key findings of the study are that public expenditure on gross capital formation, labour force and military expenditure have a negative and significant impact on economic growth in the long run while public expenditure on exports of goods and services and on imports of goods and services have a positive and significant impact on economic growth in the long run. Further in the short-run, only military expenditure can explain economic growth in Uganda and it has a positive and significant impact on economic growth. The study recommends that the government should focus on meaningful projects that have a direct bearing on the citizens' welfare. The government should also increase the spending patterns through careful reallocation of resources towards productive activities that would enhance human development in the country.