The Impact of Inflation Targeting Lite regime on Economic growth: A case study of Uganda

Sammanfattning: Price stability is an element of macroeconomic stability that is necessary to achieve economic growth in any economy like Uganda. There is no doubt that Inflation Targeting Lite (ITL) regime as a monetary policy framework has helped to achieve price stability through reduced inflation rates and inflation volatility in Uganda and other countries (Nabbosa, 2017). The ultimate goal of a monetary policy framework is to transform the macroeconomic stability achieved into sustainable economic growth and development. This paper focuses on empirically analysing the short and long run impact of ITL on economic growth in Uganda using an econometric model- Vector Error Correction Model (VECM). The empirical findings of the study show that in the long run ITL has positively impacted economic growth by maximizing the positive impact of money supply while minimizing the negative impact inflation has on economic growth. However, in the short run ITL does not have any significant impact on economic growth.