An Economic Analysis of the Main Determinants of Gross Domestic Product in Rwanda (1995-2017)

This study investigated the empirical study of the determinant of economic growth in Rwanda, utilizing time series data for the period 1995-2017. These data have been analyzed and interpreted using the statistical, analytical, synthetic methods as well as an econometrical approach was employed. The objective was to test the trends and relationship between public investment and economic growth in Rwanda. The growth of GDP has been accelerating in each successive period since the early 1995s. Three factors go into picking up the pace of growth, the two that have played role since 1996 are physical capital and human capital, the later measured in terms of the quality of the workforce and their skills level, The third factor, the efficiency of production technology, as measured by the total factor productivity (TFP), also contributed by growing at a slightly faster pace than before the 1995s. The investment in Rwanda shows a rise in public sector participation, this is a clear reflection of government policy towards public capital accumulation across country. The researcher tested and confirmed the following: the capital stock and, investment expenditure in human capital are main determinants of economic growth in Rwanda for the period. Based on the existence of a long run co-integrating relationship, the short run interactions. The researcher tested and confirmed that, there was short run and long run positive relationship between capital stock, lobour force and economic growth in Rwanda during working period. The study reveals that capital stocks have a positive and significant effect on gross domestic product in the long run. Thus capital stocks is encouraged as the government attempts to close the infrastructure gap, eliminate supply bottlenecks and provide an enabling environment for increased private investment and economic growth. Equally critical however are renewed attempts to improve the efficiency and management of capital investment, as these would ensure that its positive benefits begin to accrue in the shortest possible time. Furthermore the finding reveals that increased investment expenditure in human capital through improved education and health provision, as well as initiatives such as eliminating gender disparities and other initiatives contained in the MDGs and Vision 2020 may also be crucial in the process of economic growth.