The study sought to establish the impact of foreign aid inflow on domestic savings in Uganda. It was motivated by the low savings ratio which was identified as one of the major constraints to future growth in Uganda, under Vision 2025. Error-Correction Modelling was applied on a time series database for the period 1970-2016. Results of the study show that foreign aid has a negative impact on domestic savings in Uganda both in the short-run and long-run. An increase in foreign aid inflow by 1% of GDP leads to 0.71% decrease in gross domestic savings in the long-run. This implies that an increase in foreign aid as a whole crowded-out domestic savings in the short-run and long-run. By making resources easily available, foreign aid encourages relaxation in saving effort and increases consumption. A policy implication of this result is that Uganda should be wary in soliciting for foreign aid. If foreign aid becomes expedient, then it should be channeled to productive ventures.
| Published in | Journal of World Economic Research (Volume 9, Issue 1) |
| DOI | 10.11648/j.jwer.20200901.17 |
| Page(s) | 41-50 |
| Creative Commons |
This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited. |
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Copyright © The Author(s), 2020. Published by Science Publishing Group |
Foreign Aid, Domestic Savings, Error Correction Modelling
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APA Style
Henry Tumwebaze Karamuriro, Edward Patrick Ssemanda, Edward Bbaale. (2020). Foreign Aid Inflow and Domestic Savings in Uganda: Error Correction Modelling. Journal of World Economic Research, 9(1), 41-50. https://doi.org/10.11648/j.jwer.20200901.17
ACS Style
Henry Tumwebaze Karamuriro; Edward Patrick Ssemanda; Edward Bbaale. Foreign Aid Inflow and Domestic Savings in Uganda: Error Correction Modelling. J. World Econ. Res. 2020, 9(1), 41-50. doi: 10.11648/j.jwer.20200901.17
AMA Style
Henry Tumwebaze Karamuriro, Edward Patrick Ssemanda, Edward Bbaale. Foreign Aid Inflow and Domestic Savings in Uganda: Error Correction Modelling. J World Econ Res. 2020;9(1):41-50. doi: 10.11648/j.jwer.20200901.17
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Download@article{10.11648/j.jwer.20200901.17,
author = {Henry Tumwebaze Karamuriro and Edward Patrick Ssemanda and Edward Bbaale},
title = {Foreign Aid Inflow and Domestic Savings in Uganda: Error Correction Modelling},
journal = {Journal of World Economic Research},
volume = {9},
number = {1},
pages = {41-50},
doi = {10.11648/j.jwer.20200901.17},
url = {https://doi.org/10.11648/j.jwer.20200901.17},
eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jwer.20200901.17},
abstract = {The study sought to establish the impact of foreign aid inflow on domestic savings in Uganda. It was motivated by the low savings ratio which was identified as one of the major constraints to future growth in Uganda, under Vision 2025. Error-Correction Modelling was applied on a time series database for the period 1970-2016. Results of the study show that foreign aid has a negative impact on domestic savings in Uganda both in the short-run and long-run. An increase in foreign aid inflow by 1% of GDP leads to 0.71% decrease in gross domestic savings in the long-run. This implies that an increase in foreign aid as a whole crowded-out domestic savings in the short-run and long-run. By making resources easily available, foreign aid encourages relaxation in saving effort and increases consumption. A policy implication of this result is that Uganda should be wary in soliciting for foreign aid. If foreign aid becomes expedient, then it should be channeled to productive ventures.},
year = {2020}
}
TY - JOUR T1 - Foreign Aid Inflow and Domestic Savings in Uganda: Error Correction Modelling AU - Henry Tumwebaze Karamuriro AU - Edward Patrick Ssemanda AU - Edward Bbaale Y1 - 2020/01/27 PY - 2020 N1 - https://doi.org/10.11648/j.jwer.20200901.17 DO - 10.11648/j.jwer.20200901.17 T2 - Journal of World Economic Research JF - Journal of World Economic Research JO - Journal of World Economic Research SP - 41 EP - 50 PB - Science Publishing Group SN - 2328-7748 UR - https://doi.org/10.11648/j.jwer.20200901.17 AB - The study sought to establish the impact of foreign aid inflow on domestic savings in Uganda. It was motivated by the low savings ratio which was identified as one of the major constraints to future growth in Uganda, under Vision 2025. Error-Correction Modelling was applied on a time series database for the period 1970-2016. Results of the study show that foreign aid has a negative impact on domestic savings in Uganda both in the short-run and long-run. An increase in foreign aid inflow by 1% of GDP leads to 0.71% decrease in gross domestic savings in the long-run. This implies that an increase in foreign aid as a whole crowded-out domestic savings in the short-run and long-run. By making resources easily available, foreign aid encourages relaxation in saving effort and increases consumption. A policy implication of this result is that Uganda should be wary in soliciting for foreign aid. If foreign aid becomes expedient, then it should be channeled to productive ventures. VL - 9 IS - 1 ER -
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