ABSTRACT

This research report set out to investigate the relationship between remittance and inflation Uganda (2002-2014). Its objectives were; to establish the trend of remittance in Uganda (2002-2014), to establish the trend inflation in Uganda (2004-2014), to investigate the relationship between Remittance and inflation Workers’ remittance inflows have been rising significantly over the past decade for Uganda. They have become one of the most stable sources of foreign exchange earnings and emerged as a crucial issue for monetary and fiscal policy, hence understanding the impact of Remittances on the macroeconomic variables such as inflation is essential for the policy makers of the recipient economy. Remittance is an important demand side variable of inflation and is expected to affect inflation from the perspectives of exchange rates, money supply and balance of payments. Workers’ remittance inflows have a spending effect in the recipient economies. At the micro level remittances directly lead to an increase in household income which in turn raises their demand for goods and services. This excess demand brings inflationary pressure to the economy and triggers nontradable price level. In the study there is a positive correlation betweenremittance and inflation as can be seen from r_value correlation coefficient since it is a positive value (0J74) The coefficient of determination (R2) shows that remittance can explain 65% of the variation in inflation in Uganda which also emphasize that there is a strong positive correlation between the two variables.