The Effect of Money Supply on Economic Growth in Rwanda

Abstract

The effect of money supply in enhancing economic growth in Rwanda is investigated in this study. This study aims at assessing the Effect of money supply on economic growth in Rwanda through economic growth (GDP) per capita in Rwanda. The study uses Rwanda National Bank and World Bank data from 2008 to 2018. This study used the autoregressive distributed lag (ARDL)-bounds testing to co-integration and Ordinary Least Squares regression technique for analysis of the data to assess the impact of money supply on GDP per capita in Rwanda. The study model is composed of five macroeconomics variables which are Gross Domestic Product per capita, Money supply, Lending Interest Rate, Gross Capital Formation and deposit rate. The study findings Shows a statistical significant positive association between money supply and economic growth in Rwanda both in short run and long run. This study suggests that money supply should be increase at a steady rate by keeping pace with the growth of Rwandan economy.