Examining the effects of inflation and unemployment on economic growth in Rwanda

Abstract

This study analyzes the impact of inflation and unemployment on economic growth in Rwanda, providing insights for effective economic policy formulation. Using statistical methods like impulse response function (IRF), historical decomposition, and variance decomposition, the study reveals how real GDP, inflation, and unemployment respond to shocks. The historical decomposition analysis highlights the increasing role of external factors in influencing fluctuations, while the variance decomposition analysis highlights the significance of inflation and unemployment shocks in driving fluctuations in real GDP. The findings emphasize the importance of understanding the impact of inflation and unemployment shocks on Rwanda's economy and formulating appropriate policies to mitigate their effects. Recommendations include developing a robust macroeconomic policy framework, implementing targeted employment policies, encouraging economic diversification, and fostering stakeholder collaboration for sustainable economic growth. This study offers valuable insights for policymakers, businesses, and researchers to navigate uncertain economic landscapes and promote economic stability and growth in Rwanda.