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Relationship Between Inflation and Real Economic Growth in Rwanda
Nkikabahizi, Ferdinand; Ndagijimana, Joseph; Musabanganji, Edouard
2017In Heshmati, Almas (Ed.) Studies on Economic Development and Growth in Selected African Countries
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Keywords :
Real gross domestic products; Inflation; Unemployment; Co-integration; Vector error correction model
Abstract :
[en] This study examines the impact of economic stability measures (inflation and unemployment rates) on real gross domestic product (GDP) in Rwanda. It uses quarterly data for the period of 2000Q1–2015Q4 collected from the Ministry of Finance and Economic Planning, Central Bank of Rwanda and the National Institute of Statistics of Rwanda (NISR). This study concludes that inflation and unemployment have a long-run negative and significant relationship on real gross domestic product. In the long run, the coefficients are not significant at the 5% level; it is only the inflation coefficient and error which are significant. Real gross domestic product increases when inflation reduces with a p-value of 0.00266; real gross domestic product increases when unemployment reduces with a p-value of 0.09882. The coefficient from the error correction model means that the effect of the shock will reduce by 0.0483% each quarter, meaning that the effect of the shock will reduce by 19.32% in each 4th quarter. This further means that it will end at 20 quarters, that is, after a five-year period. It has to be highlighted that there is a weak relationship between real gross domestic product and both inflation and unemployment rates.
Disciplines :
Macroeconomics & monetary economics
Author, co-author :
Nkikabahizi, Ferdinand;  University of Rwanda > Economics
Ndagijimana, Joseph;  University of Rwanda > Economics
Musabanganji, Edouard ;  Université de Liège - ULiège > Form. doct. sc. agro. & ingé. biol.
Language :
English
Title :
Relationship Between Inflation and Real Economic Growth in Rwanda
Publication date :
2017
Main work title :
Studies on Economic Development and Growth in Selected African Countries
Author, co-author :
Heshmati, Almas
Publisher :
Springer, Singapore, Singapore
ISBN/EAN :
978-981-10-4451-9
Pages :
103-122
Peer reviewed :
Peer reviewed
Available on ORBi :
since 01 June 2017

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