International Journal of Business Management and Administration Vol. 3(2), pp. 029-039, May 2014 ISSN 2327-3100 ©2014 Academe Research Journals

Full Length Research Paper

The effect of remittances on gross domestic savings in Uganda (1999-2011)

Will Kaberuka¹* and Rhoda Namubiru²

^1*Makerere University Business School, P.O.Box 1337, Kampala-Uganda

²Makerere University College of Health Sciences, P. O. Box 7062 Kampala-Uganda

*Corresponding author. E-mail: kaberukawill@yahoo.com.

Accepted 12 May, 2014

Abstract

This paper investigates the effect of remittances on gross domestic savings in Uganda using maximum likelihood framework. The results show that remittances have a significant negative effect on gross domestic savings. This contradicts the studies that show positive relationship between remittances and gross domestic savings but in agreement that remittances are mainly devoted to daily consumption needs and that foreign capital inflows have a negative and significant impact on domestic savings. The study also showed that other factors such as real effective exchange rate, per capita gross domestic product, and inflation rate and deposit interest rate affect remittances positively. It is therefore recommended, that government should establish agencies in countries to where most Ugandans migrate in order to capture their savings and help them channel those savings into productive projects in Uganda.

Key words: Remittances, gross domestic savings, maximum likelihood, migration, developing countries.