Econometrics Analysis of Impact of International Trade on Economic Growth in Rwanda (1990-2017)

Abstract

This study examined the impact of international trade on economic growth in Rwanda from 1990-2017. Descriptive data analysis was used and the following variable were considered: Gross domestic product (GDP) as proxy for economic growth, trade openness (TO), Foreign direct investment (FDI). We used the Vector Error Correction Model (VECM) estimation method for data analysis using Econometric software (E-Views 8.0). Secondary data was used to conduct this study and the required data was collected from World Bank. Literature has shown that international trade contributes to economic growth. Empirical investigation reveals that both trade openness (TO) and foreign direct investment (FDI) are positively related to Gross domestic product (GDP). As a conclusion, there is a correlation amongst GDP and its regressors. Strengthening trade openness and direct investment with the objective of striving for Rwanda sustainable development is recommended.