International Trade and Economic Growth: A Cointegration Analysis for Uganda analyzes the long-run relationship between trade and economic growth in Uganda from 1982 to 2018 using the autoregressive distributed lag (ARDL) model. The results show that in the short-run, imports reduced economic growth while exports increased it. However, in the long-run, inflation reduced economic growth. Unit root tests confirmed the variables were integrated of order one (I(1)), allowing for cointegration tests which found a long-run relationship between the variables.

1. International Trade and Economic Growth: A Cointegration Analysis for Uganda
International Trade and Economic Growth: A Cointegration
Analysis for Uganda
*James Kizza1, Amonya David2, Kigosa Nathan3
1,2,3Department of Economics and Statistics, Kyambogo University, Uganda
The focus of the study was to establish whether there exists a long run relationship between
various trade and other macro economic variables for Uganda for the period 1982 to 2018. The
Autoregressive distributed lag (ARDL) model was used to establish the existence of a long run
relationship between economic growth and trade variables. The empirical results suggest that in
the short run, imports reduced development by -0.11 in second lag as P=0.025<0.005, while the
exports increased development by 0.08 in the first lag as the p=0.015<0.005. But this was not true
for the second lag. Lastly at all lags for the short run, inflation had positive run relationship on
development (GDP). However, in the long run inflation reduced development by 0.61 ceteris-
paribus at 5% level of significance.
Key words: International trade, economic growth, cointegration, exports, imports, inflation, GDP, Autoregressive
distributed lag.
JEL Codes: C22, F1, F4
INTRODUCTION
The focus of the study is to establish whether there exists
a long run relationship between various trade and other
macro economic variables for Uganda for the period 1982
to 2018. The study employs the ARDL approach to
establish the existence of a long run relationship between
economic growth and trade variables. The classical
economists like Adam Smith and David Ricardo held that
trade promoted economic growth by allowing the optimal
distribution and utilization of resources. Trade enabled
countries to specialize where they have the greatest
comparative advantage and as well provided an avenue
for countries to get market for their surplus products. Trade
is indispensable in any development policy of the country.
Trade enables producers to get market for their surplus
output (Abdullahi et al., 2013). Trade encourages
competition, improves lives through increased choice,
allows specialization and results in improved output and
productivity. Clunnies (2009) refer to economic growth as
an increase in real per capita income which can be
sustained over a long period of time. Uganda like many
Sub Saharan Africa countries is largely dependent on the
export of agricultural commodities for its growth which
unfortunately has poor terms of trade and may not be
sustainable in the long run (Bank of Uganda Report, 2019;
Uganda Economic Outlook, 2019; R.Waiswa, Makerere
University, Kampala,2018) .
Uganda’s exports can be classified broadly into two. First,
the traditional exports like coffee, cotton, tobacco and tea
that have dominated Uganda’s exports since
independence. Second, the non traditional exports that
came to the limelight from 1986 when the National
Resistance Movement (NRM) took over power. The non
traditional exports were promoted by the NRM government
to boost the country’s export base and increase the
country’s foreign exchange earnings. The promotional of
non traditional exports, such as, fish and fish products, iron
and steel, gold, sugar, maize and flowers was also meant
to salvage the country from over reliance on a few exports.
The key feature in the promotion of non-traditional exports
was the promotion of the hitherto considered food crops,
such as, beans and maize to join the list of the country’s
exports. This deliberate effort by government to promote
non traditional exports has paid off by gradually helping the
country to transit from a dominantly subsistence economy
to a commercial/market economy. This policy has also
enabled and boosted the emergence of agri-business
related industries mainly involved in the processing of
agricultural products.
*Corresponding Author: James Kizza; Department of
Economics and Statistics, Kyambogo University, Uganda.
Email: kizzajames2016@gmail.com; Co-Author 2
Email:
david.amwonya@gmail.com 3
Email: nathankigosa@yahoo.com
Research Article
Vol. 6(1), pp. 150-156, July, 2020. © www.premierpublishers.org. ISSN: 3012-8103
World Journal of Economics and Finance

2. International Trade and Economic Growth: A Cointegration Analysis for Uganda
James et al 151
Uganda mostly exports agricultural products that
constitute over 80% of the country’s exports.
Unfortunately, agriculture as an economic activity is largely
dependent on weather conditions, where if when
favorable, agriculture can spur growth and if not favorable
may slow the country’s rate of economic growth. (Uganda
Economic Outlook, 2019). In the study about what type of
exports contribute to Uganda’s economic growth, Waiswa
(2018) noted that much as both traditional and non
traditional exports contribute to Uganda’s economic
growth, the traditional exports such as coffee and tea had
a significant positive effect on economic growth as
compared to the non traditional exports like flowers and
fish. The Bank of Uganda report (2019) authenticate the
findings of Waiswa (2018), and the report further decries
the systemic trade deficit the country is facing as a result
of her dependence on the exports of low value agricultural
products that are also weather dependent and the
dependence on fuel imports that are highly priced. In
2017, Uganda’s exports stood at $3.339 billion against the
import bill of $5.036 billion. The low revenues obtained
from the country’s exports as compared to what the
country spends on imports saw the country’s risk rating
deteriorating from low to moderate risk of debt distress
(Uganda Economic Outlook, 2019)
LITERATURE REVIEW
Empirical evidence/ Theoretical analysis
Thao and Hua (2016) evaluated the impact of trade policy
reforms on Vietnam’s foreign trade based on a shift of the
economy from centralized planning to market –oriented
socialist economy. They used the ARDL model to test for
the existence of a long run relationship between trade
policy reform and foreign trade. They reached a conclusion
that policy reforms had enabled Vietnam to achieve faster
economic growth and improve the standards of living of the
people. The study by Kalaitzi (2013) on the relationship
between exports and economic growth in the United Arab
Emirates confirmed the existence of a long-run
relationship between exports and economic growth. From
the Keynesian model of National Income, the relationship
between exports and imports is key in determining the
country’s level of national income whereby if imports
exceed exports as the case is with Uganda, the country
becomes vulnerable to worsening standards of living. With
limited exports in relation to imports, the country is likely to
experience low levels of foreign exchange and this may
eventually manifest in rising levels of inflation that may
create a circle of persistent low growth levels. It is therefore
imperative that countries pay attention to key macro
economic variables that are necessary to drive the growth
of their economies.
Economic theory posits a positive relationship between
exports and economic growth. Studies by (Kaberuka et al,
2014; Krueger, 1997; Medina, 2001; Mongale and Mogoe,
2014; Oviemuno, 2007) support the existence of a positive
relationship between exports and economic growth. A
study by Okuwa et al. (2016) on the effects of international
trade on West Africa economic growth revealed that a one
percent increase in export variable will lead to 5.11 percent
increase in GDP growth. Several other studies on the
African continent confirm the significant positive role
played by exports in the growth of the country’s economy
(Levin and Raut, 1997; Khalifa al-Youssif, 1997). Tigist
(2015) study on the role of agricultural exports on
economic growth in Ethiopia confirmed the existence of a
positive significant effect between agricultural products
such as coffee and economic growth. The growth in
exports promotes capacity utilization and productivity
gains that may result from technology transfer. However,
a study by Usman (2011) found that exports have a
negative impact on real output.
Economic theory posits the existence of a negative
relationship between imports and economic growth.
Kaberuka et al. (2014) argue that a negative sign is
expected between imports and economic growth. This is
supported by a study done by Mongale and Mogoe (2014)
and Usman (2011). However, a study by Okuwa et al.
(2016) revealed the existence of a positive but insignificant
impact between imports and the growth of GDP.
The debate on the relationship between inflation and
economic growth in economic literature is mixed. Tobin
(1965) suggested the existence of a positive relationship
between economic growth and inflation based on the
reasoning that during inflation individuals tend to acquire
more capital than holding money which leads to growth.
This is supported by a study done by Mongale and Mogoe
(2014) on the impact of international trade on economic
growth in South Africa where the results revealed the
existence of a positive relationship between inflation rate
and GDP. On the contrary, Stockman (1981); Lucas and
Stokey (1987); Andres and Hernando (1997); Fischer
(1993) and De Gregorio (1993) posit a negative
relationship between inflation and growth. The monetarists
hold a neutralists view where they clearly expound that
inflation which is mainly as a result of increases in money
supply does not in anyway affect employment and output
variables (growth) as the increase in money supply is
offset by an equal rise in prices.
Waiswa (2018) used the ARDL model to establish the type
of exports that lead to economic growth in Uganda. His
study found that agricultural and not non agricultural
exports lead to economic growth. The study recommended
the need to boost the productivity in the agricultural sector
in terms of quality and value addition. Bbaale and Mutenyo
(2011) studied the export composition and how it explains
economic growth in Sub-Saharan Africa and reached a
conclusion that confirm the existence of a positive
connection between exports and economic growth. Bbaale
and Mutenyo (2011) observed that much as agricultural
products are highly vulnerable to vagaries of nature, they

3. International Trade and Economic Growth: A Cointegration Analysis for Uganda
World J. Econ. Fin. 152
continue to play a significant role in most of Sub- Saharan
Africa when compared to manufacturing exports, which
they attribute to the theory of comparative advantage.
The ARDL model is a cointegration method developed by
Pesaran et al. (2001) to test the presence of the long run
relationship between variables. The ARDL approach is
credited by various researchers to have many advantages
over the classical integration tests (Nkoro and Uko, 2016;
Baig et al., 2018; Harris et al., 2003; Alimi, 2014). The
technique is very useful in determining the long run
relationship between series with different order of
integration. Unlike the traditional cointegration tests, the
ARDL model does not require pretests for unit roots and is
recommended in situations where there is a single long run
relationship between the underlying variables in a small
sample size. A stochastic process Yt is assumed to have
a unit root problem if its first difference, 1 tt YY is
stationary. The presence of a unit root implies that a time
series under review is non stationery while the absence of
it implies that a time series is stationery. Nkoro and Uko
(2016) however advise that unit roots be tested to establish
the possibility of variables that may be integrated by I(2)
as the presence of I(2) will render the estimations using
the ARDL invalid. In the ARDL model the dependent
variable is expressed by the lag and current values of the
independent variable and its own lag value and is one of
the most general dynamic unrestricted model in
econometrics. When variables cointegrate, it means the
existence of the presence of the steady state equilibrium
between variables.
METHODOLOGY
In trying to establish the long run relationship between
international trade and economic growth, the study
employed the ARDL estimation procedure. Several
researchers recommend the use of ARDL approach where
time series data depict mixed levels of integration. The
ARDL model is used to estimate variables in their levels or
non differenced data. Whereas the ARDL approach does
not require one to pretest for the existence of unit roots
among the study variables, we continue to run unit root
tests to ensure that the ARDL model is truly appropriate
and gives us valid results. Unit root tests estimated using
the Augmented Dicker –Fuller estimation was done to
establish the existence of unit roots that are a common
occurrence with time series data. The estimation of unit
root tests also helps to forestall the danger of estimating
an irrelevant ARDL model, that is, in case there exists the
possibility of some variables being integrated by I(2). Since
our variables were of a mixed order only limited to I (0) and
I (1), we continued to apply the ARDL model. We run
cointegration tests to establish the existence of a long run
relationship between the study variables. Both the Trace
Statistic and Maximum Eigen value tests were run. The
study explanatory variables used to undertake a
cointegration analysis in order to establish a link between
trade and economic growth were: export share of GDP
(EXGDP), import share of GDP (MGDP) and Inflation
(INFL). The study uses annual time series data for Uganda
for the period 1982 to 2018 from the World Bank data
base. The variables are said to be cointegrated if the
residual is stationery. Cointegration between variables
provides evidence of the existence of a long run
relationship between the variables. Given that our
variables were found to be integrated of I(0) and I(1), and
the cointegration tests established the existence of a long
run relationship between the study variables, we proceed
to investigate the effects of the different variables under
study on economic growth using the ARDL model. We
conduct diagnostic tests to test the robustness of the
model.
Study Findings
The real values of the variables were converted to logs and
tested for stationary using the Augmented Dickey Fuller
(ADF) test
Table 1: Augmented Dickey Fuller (ADF) Test Results before Differencing
Variable t- ADF
Statistic
Critical 1% Critical 5% Critical 10% p-value Conclusion
LGDP 1.243 -3.682 -2.972 -2.618 0.9963 Nonstationary
LINFL -2.898 -3.716 -2.986 -2.624 0.0456 Stationery
LMGDP -1.321 -3.675 -2.969 -2.617 0.6194 Nonstationary
LEXGP -1.488 -3.675 -2.969 -2.617 0.5397 Nonstationary
EC -2.489 -3.716 -2.986 -2.624 0.1182 Nonstationary
Inflation was found to be stationery at 10% level of
significance. To ensure all variables were stationery, we
proceeded to difference all the variables and the results
showed that all variables became stationary at first
differencing at all levels of significance except GDP which
was only stationery at both the 5% and 10% level of
significance. All variables were thus integrated of order
one 1(1) which made it possible to conduct cointegration
tests on the variables (Table 2)

4. International Trade and Economic Growth: A Cointegration Analysis for Uganda
James et al 153
Table 2: Augmented Dickey Fuller (ADF) Test Results after 1st
Differencing
Variable t- ADF Statistic Critical 1% Critical 5% Critical 10% p-value Conclusion
dLGDP -3.593 -3.689 -2.975 -2.619 0.0059 Stationary
dLINFL -8.479 -3.743 -2.997 -2.629 0.0000 Stationery
dLMGDP -6.853 -3.682 -2.972 -2.618 0.0000 Stationary
dLEXGP -6.601 -3.682 -2.972 -2.618 0.0000 Stationary
dEC -18.438 -3.682 -2.972 -2.618 0.0000 Stationary
To test for cointegration, the Engle –Granger approach
was used with an OLS regression run on the variables to
find out their stationarity, where forth, all variables were
found to be integrated of order one I(1), residuals were
saved and an ADF test was performed on the residuals
which were found to be stationery. The equation was run
in natural logs and in the form:
LGDP =
  EXGPLMGDPLINFLLEXR 43210
Cointegration test result and analysis
The study tested the existence of a long run relationship
between the study variables through running cointegration
tests. Both the Trace Statistic and Maximum Eigen value
tests were run
Table 3: Unrestricted Cointegration rank test (Trace)
Maximum
rank
Parms LL
Eigen
value
Trace
statistic
Critical
value
(5%)
0 80 161.0614 . 171.5773 68.52
1 89 195.4311 0.8833 102.8379 47.21
2 96 220.5561 0.79202 52.5879 29.68
3 101 233.0702 0.54257 27.5597 15.41
4 104 243.7139 0.48585 6.2723 3.76
5 105 246.8501 0.178
Since the eigen values are less than the trace static, this
indicates the existence of a long run relationship between
the explanatory variables and the dependent variable. The
null is thus rejected at 5% level.
Table 4: Unrestricted Cointegration rank test
(Maximum Eigen value)
Maximum
rank
Parms LL
Eigen
value
Maximum
statistic
Critical
value
(5%)
0 30 95.10524 . 39.9341 33.46
1 39 115.0723 0.69104 35.6177 27.07
2 46 132.8812 0.64921 18.2892 20.97
3 51 142.0258 0.41604 14.2853 14.07
4 54 149.1684 0.34306 4.6781 3.76
5 55 151.5075 0.12855
Since the eigen values are less than the maximum
statistic, this indicates the existence of a long run
relationship between the explanatory variables and the
dependent variable. The null is thus rejected at 5% level.
From the cointegration Tables 3 and 4, both the trace
statistic and maximum Eigen value statistic indicate the
presence of cointegration at 5% level of significance
implying the existence of a long run relationship between
the explanatory variables and the dependent variable.
Johansen and Juselius (1990) suggest that where Trace
Statistic and Maximum Eigen value tests produce different
results, it is preferable to use the results of the trace test.
In our study, results in both tables 3 and 4 yields the same
results and no need to make a choice between them.
Table 5: Multiple regression model outputs
Parameter estimates
Outputs from the OLS, model indicated that both exports
and imports had a positive impact on development
whereas inflation affected development negatively.
The Auto –Regressive Distributed Lag (ARDL) model
Dave (2013) recommends the use of the ARDL model
once preliminary results indicate the existence of mixed
levels of integration I(0) and I(1) and confirmation of the
existence of a long run relationship between variables
under study. The ARDL model estimated is
△ (𝐿𝐺𝐷𝑃) = 𝜆0 + ∑ 𝜆𝑖
𝑛
𝑖=0
△ (𝐿𝐺𝐷𝑃) 𝑡−𝑖 + ∑ 𝜆𝑖
𝑛
𝑖=0
△ (𝐿𝑀𝐺𝐷𝑃) 𝑡−𝑖
+ ∑ 𝜆𝑖
𝑛
𝑖=0
△ (𝐿𝐸𝑋𝐺𝑃) 𝑡−𝑖 + 𝛼1 𝐿𝐺𝐷𝑃𝑡−1
+ 𝛼2 𝐿𝑀𝐺𝐷𝑃𝑡−1 + 𝛼3 𝐿𝐸𝑋𝐺𝑃𝑡−1 + 𝑉𝑖𝑡
The model outputs above imply that in the short run,
imports reduced development by -0.11 in second lag as
P=0.025<0.005, while the exports increased development
by 0.08 in the first lag as the p=0.015<0.005. But this was
not true for the second lag. Lastly at all lags for the short
run, inflation had positive run relationship on development
(GDP). However, in the long run inflation reduced
development by 0.61 ceteris-paribus at 5% level of
significance.
Loggdp Coef. Std. Err. t P>t
[95%
Conf. Interval]
Logm 1.43 0.25 5.73 0.000 0.9 1.9
Logx 0.70 0.16 4.37 0.000 0.4 1.0
Logpe -0.09 0.04 -2.15 0.040 -0.2 0.0
_cons 17.05 0.75 22.76 0.000 15.5 18.6
R-squared 0.9
F-value 0.000

5. International Trade and Economic Growth: A Cointegration Analysis for Uganda
World J. Econ. Fin. 154
Table 6: ARDL Results
D.
loggdp Coef.
Std.
Err. t P>t
[95%
Conf. Interval]
ADJ
Loggdp
L1. -0.05 0.01 -5.36 0.013 -0.08 -0.02
LR
Logm 2.72 2.06 1.32 0.279 -3.85 9.29
Logx -0.02 0.35 -0.05 0.965 -1.13 1.10
Logpe -0.61 0.12 -4.99 0.015 -0.99 -0.22
SR
Loggdp
LD. -0.37 0.11 -3.46 0.041 -0.72 -0.03
L2D. -0.09 0.07 -1.24 0.302 -0.32 0.14
Logm
D1. -0.17 0.08 -2.04 0.133 -0.44 0.10
LD. -0.07 0.06 -1.12 0.344 -0.28 0.13
L2D. -0.12 0.04 -2.8 0.068 -0.26 0.02
L3D. -0.11 0.03 -4.16 0.025 -0.19 -0.03
Logx
D1. 0.03 0.02 1.81 0.168 -0.02 0.08
LD. 0.08 0.02 5.08 0.015 0.03 0.13
L2D. -0.05 0.01 -4.76 0.018 -0.09 -0.02
Logpe
D1. 0.01 0.00 1.34 0.273 -0.01 0.02
LD. 0.02 0.00 6.05 0.009 0.01 0.04
L2D. 0.02 0.00 6.41 0.008 0.01 0.04
L3D. 0.02 0.00 6.04 0.009 0.01 0.03
_cons 1.27 0.18 7.11 0.006 0.70 1.84
Diagnostic tests
These tests were run to test the robustness of the model.
The Breusch –Godfrey LM test for autocorrelation was
used to test the null hypothesis that the errors are serially
independent. The Breusch- Pagan/Cook –Weisberg test
for heteroskedasticity was used to test the null hypothesis
that the errors exhibit a constant variance.
Table 7: Diagnostic tests for the model
Test Method Statistic P-value
Normality Jack-Bera Chi2=2.89 0.23571
Hetero-
scedasticity
Breusch-Pagan /
Cook-Weisberg test
for
heteroskedasticity
Chi2 =3.18 0.0747
Serial
correlation
Breusch-Godfrey
LM test for
autocorrelation
F=2.027 0.1213
Evidence from the diagnostics tests showed that GDP as
the dependent variable was normally distributed non-
heteroscedastic and with no serial correlation as the
corresponding p-values from the test statistic were greater
than 5% level of significance.
DISCUSSION OF RESULTS
The ARDL model outputs imply that in the short run,
imports reduced development by -0.11 in second lag as
P=0.025<0.005, while the exports increased development
by 0.08 in the first lag as the p=0.015<0.005. But this was
not true for the second lag. Lastly at all lags for the short
run, inflation had positive run relationship on development
(GDP). However, in the long run inflation reduced
development by 0.61 ceteris-paribus at 5% level of
significance.
The ARDL model results indicated that in the short run,
imports reduced development by -0.11. In the short run,
the negative impact between imports and growth can be
explained by the fact that Uganda is paying more to
acquire imported products compared to the receipts from
her exports. The persistent trade deficits that the country
faces are attributable to the low levels of revenues the
country obtains from her exports as compared to the high
spending on imports (Uganda Economic Outlook, 2019).
The negative relationship between imports and
development confirm the results of earlier studies done by
Kaberuka et al. 2014; Mongale and Mogoe, 2014 and
Usman, 2011. The high import spending has increased the
country’s risk rating from low to moderate risk (Uganda
Economic Outlook, 2019). The negative coefficient
between imports and economic growth is thus a caution to
the Uganda government to come up with interventions to
reduce over reliance on imports if it is to maintain her
currently reported high GNP growth rates. From the model,
in the long run imports are depicted as having a positive
but insignificant effect on growth which rhymes with the
findings of Okuwa et al, (2016). This result point to the fact
that much as several studies relate imports to negative
growth, there exist economic situations where imports may
be a key driver to drive the country into the desired
economic growth. For example, if imports are meant to
acquire inputs needed to boost the country’s production
levels. The insignificant long run effect of imports on
development is a warning to governments that over
reliance on imports is not sustainable to a country’s
growth.
The ARDL model indicated that exports increased
development by 0.08 in the first lag as the p=0.015<0.005.
But this was not true for the second lag. The positive
relationship between exports and growth depicted by the
model is in line with earlier findings from studies done by
(Kaberuka et al., 2014; Krueger, 1997; Medina, 2001;
Mongale and Mogoe, 2014; Oviemuno, 2007; Okuwa et
al., 2016; Levin and Raut, 1997; Khalifa al-Youssif, 1997;
Tigist, 2015). The study indication that the relationship
between exports and growth may not last for long may be
explained by the fact that Uganda is largely dependent on
the exportation of primary agricultural products that are
largely affected by vagaries of nature and are vulnerable
to unfavorable terms of trade. This finding echo Usman
(2011) conclusion that exports have a negative impact on

6. International Trade and Economic Growth: A Cointegration Analysis for Uganda
James et al 155
real output. Whereas, studies by Waiswa (2018) and
Bbaale and Mutenyo (2011) support the existence of a
significant positive role played by agricultural exports to a
country’s development, several other studies are in
disagreement. The Bank of Uganda report (2019) and the
Uganda Economic Outlook (2019) attribute the
deteriorating country’s risk rating on her dependence on
low value agricultural products. The study finding implies
that if Uganda is to have sustainable benefits from her
exports, she must pay attention to the structure of her
exports which should move towards targeting the
exportation of high value manufactured products.
The model indicated that at all lags for the short run,
inflation had positive run relationship on development
(GDP). However, in the long run inflation reduced
development by 0.61 ceteris-paribus at 5% level of
significance. This finding agrees with economic theory
where in the short run, low levels of inflation are known to
stimulate growth (Tobin, 1965; Mongale and Mogoe, 2014)
while persistent levels of inflation are associated with
negative growth effects (Stockman, 1981; Lucas and
Stokey, 1987; Andres and Hernando, 1997; Fischer, 1993;
De Gregorio, 1993). The monetarists’ neutral view on
inflation is not supported in this study. Inflation lowers the
value of a country’s currency, discourages her exports and
makes the country’s imports less competitive which
worsens the country’s balance of payments position. This
predicts adverse effects on the country’s levels of
economic growth.
CONCLUSIONS AND POLICY IMPLICATIONS
The ARDL model outputs imply that in the short run,
imports reduced development by -0.11 in second lag as
P=0.025<0.005, while the exports increased development
by 0.08 in the first lag as the p=0.015<0.005. But this was
not true for the second lag. At all lags for the short run,
inflation had positive run relationship on development
(GDP). However, in the long run inflation reduced
development by 0.61 ceteris-paribus at 5% level of
significance.
The ARDL model indicated that in the short run, imports
reduced development by -0.11 in second lag as
P=0.025<0.005 meaning that while imports may be
indispensable in promoting development for a while, using
import as a strategy to promote development may not be
sustainable. Uganda is an import dependent country which
has increasingly put the country at a debt risk. It is
recommended that the government devise means of
reducing on her import bill by adopting an import
substitution strategy of commodities that can be viably
produced at home, such as agricultural related imported
food products. This can be achieved by the government
promoting joint ventures with foreign investors. In addition,
the government can provide cheap capital to local
investors interested in setting up agri-based industries
given that the country is predominantly an agro based
economy.
The ARDL model showed that exports increased
development by 0.08 in the first lag as the p=0.015<0.005.
But this was not true for the second lag. This attest to the
fact that much as exports are associated with positive
effects on growth, this effect may not have sustainable
results. This is because Uganda basically exports low
value agricultural products that fetch little foreign
exchange and imports high value products. We
recommend that the government seriously considers
investment in industries that promote high value addition
agricultural processing export products. The government
should diversify her export base from the current
exportation of largely low value primary products to include
the exportation of high value manufactured products.
The model indicated that at all lags for the short run;
inflation had positive run relationship on development
(GDP). However, in the long run inflation reduced
development by 0.61 ceteris-paribus at 5% level of
significance. It is recommended that the government
continues with its path of ensuring positive macro
economic stability as this is key in building and maintaining
investor confidence which is an essential component to
sustainable growth.
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Accepted 30 June 2020
Citation: James K, Amonya D, Kigosa N (2020).
International Trade and Economic Growth: A Cointegration
Analysis for Uganda. World Journal of Economics and
Finance, 6(1): 150-156.
Copyright: © 2020 James et al. This is an open-access
article distributed under the terms of the Creative
Commons Attribution License, which permits unrestricted
use, distribution, and reproduction in any medium,
provided the original author and source are cited.