FDI AND ECONOMIC TRANSFORMATION IN RWANDA: AN ANALYSIS OF RECENT TRENDS

Abstract

This study is intended to assess the impact of Foreign Direct Investment on Rwandan economic growth, such determinants are gross domestic saving, population, and gross domestic product and to confirm if it has an impact on Rwandan economic growth. To achieve this study a multivariate time series analysis was used to analyze the impact of Foreign Direct Investment on economic growth. In this study, diagnostic tests and the results confirmed (proved) that the model was good and the results from the tests suggest that the variables were not seriously affected by heteroskedasticity and serial correlation problems. The results showed a long-run relationship of variables based on the results from the unit root test of residuals of variables. The results also showed that the coefficient of ECM (-1) is positive and statistically significant, leading the model to be cointegrated between their variables and errors were corrected in the long run and some of the variables were statistically significant which showed that there are short-run relationships between variables where an increase in foreign direct investment decreased economic growth holding other factors constant