THE EFFECT OF TRADE LIBERALISATION ON TRADE BALANCE IN RWANDA (2000-2023)

Abstract

This research paper aims to investigate the effect of trade liberalisation on trade balance of Rwandan economy from 2000 to 2023. Specifically include assessing the relationship between trade liberalisation and trade balance, evaluating the effects economic growth and consumption on balance of trade deficit, and analyzing historical trends in tariff rate and balance of trade. The significance of this study lies in providing policymakers with insights to formulate effective economic policies. The study assesses key economic variables, including Tariff Rate on All Product, External Trade Balance, Gross Domestic Product, and Final Consumption Expenditure. Utilizing graphical representation and Ordinary Least Squares (OLS) technique, the research explores trends and provides empirical findings. The results reveal a long-run negative influence of Tariff Rate on All Product (as variable determine liberalisation) on balance of trade deficit, as Tariff rate on All product (TRAP) resulted negative coefficient; however, in short-run resulted positive effect. Furthermore, the Gross Domestic Product negatively affect balance of trade deficit, Final Consumption Expenditure has positive effect on balance of trade deficit. These findings contribute valuable contribution to researchers, offering a case study for trade liberalisation and external sector of Rwanda economy. Key words Tariff Rate on All Product (TRAP), External Trade Balance (ETB), Gross Domestic Product (GDP), Final Consumption Expenditure (FCE), and Foreign Direct Investment (FDI).