The analysis of export diversification on economic growth: empirical analysis of Rwandan case

Abstract

This study analyzed the export diversification on the economic growth in Rwanda between 1999 and 2016. Using co-integration and error correction models, the thesis found a long run relationship between the variables under study. Empirically, the study attempted to examine the hypothesis that export diversification was linked to economic growth by considering the fundamental variables used in the estimated model. The empirical results revealed that Rwanda’s terms of trade were negative and did not have significant contribution to RGDP. The empirical evidence regarding the relationship between exports and economic growth was not robust, although the results of the study indicated that exports had a positive effect on the overall economic growth. Export could be considered as an engine of growth even if the study revealed that its impact was quantitatively insignificant in short-term. The findings results also indicated that the REXP led to growth of RGDP. The positive correlation of RGFCF was confirmed and RTOT has been identified with unidirectional relationship. The evidence suggested that trade strategies promote exports expansion of goods and services which are required as driver of sustainable economic growth in Rwanda.