Abstract:

This study analyses the the private sector credit -economic growth nexus in Uganda using the Fully Modified Ordinary Least Square (FMOLS). The method was applied to quarterly data spanning from 2000: Q1 to 2018: Q4. We found a cointegrating relationship between economic growth and its selected determinants. Amongst others, findings from the error correction model confirmed a positive and statistically significant effect of private sector credit on output. In view of the financial intermediation roles of deposit money banks, the paper supports the ongoing efforts of the Central Bank of Uganda (BoU) in promoting a sound and real sector-friendly financial system. Also, the commitment of the bou to the gradual reduction in interest rates is meaningful for the country’s growth objectives.