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
