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Abstract
The study uses the flexible accelerator model to examine determinants of the level and growth of
investment in machinery and equipment for a sample of tea-processing firms in Uganda. Using a
dynamic panel data model, we find that, in the long run, the level of investment in machinery and
equipment is positively influenced by the accelerator, firm-level liquidity, and a favourable investment
climate in the country. Depreciation of the exchange rate negatively affects investment. We conclude
that firm-level strategies that increase output and profitability, and a favourable investment policy
climate, are imperative to the growth of the tea industry