Abstract:
One of the countries that comprise the East African Community is Rwanda. As a developing country, the primary objective of policy is to achieve rapid and sustained economic growth. Rwanda's current goals are to become a middle-income nation by 2035 and a high-income nation by 2050. This will be accomplished by means of the crucial planning and policy framework that will direct the endeavors of all stakeholders.
The aim of this study is to investigate the relationship between development factors and Rwanda's economic growth. The study gathers econometric secondary data from 1970 to 2023 which were availably provided by World Bank indicators. To confirm that the development factors affect Rwanda economic growth, the Multivariate time series analysis was utilized in this study to examine the connection between. Diagnostic tests and the findings of this study validate the validity of the model in which the independent variables jointly explain the dependent variable. The data is analyzed using econometric approach Eviews-10.
The test findings indicate that the speeds of adjustment of 67% toward equilibrium existence in long run. The results of model indicate that foreign direct investment with 0.23, trade openness with 1.046 and gross domestic saving with 0.22 determined an increase in economic growth while natural resources with 0.047, net export with 0.61, gross capital formation with 0.27 determined a decrease in economic growth
The findings also reveal that impact of FDI is in long run than in short run leads to the lower repatriation of foreign earnings to the parent company. The findings support the notions that Rwanda uses the earnings repatriation policy because the FDI lead to gain of control over strategic industries and a potential for cultural and social impacts. This analysis also revealed that the model passed various diagnostic tests.
Based on the outcomes of the unit root test of the residuals of the variables, the results indicated that there is a long-term association between the variables more than in short run. The domestic efforts continue enhance manufacturing exports needs reassessment in line with the FDI policy framework in order to reap maximum and long-term equilibrium.
