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KIGALI INSTITUTE OF EDUCATION
OCTOBER 2010
Analysis of factors affecting inflation rate in Rwanda
(1990-2009)
BY: Richard UFITINEMA
REG. NUMBER: 3014/06
A research project submitted to the faculty of social
sciences and business studies, Kigali Institute of education
In partial fulfillment of the requirements for the degree of
bachelor of social sciences (hons), Economics with Education and QTS
(Secondary).
Word count: 11,080
Supervisor: Mr. Alain Claude KARASIRA
ABSTRACT
This study was carried out in the context of global financial
crisis characterized by a worst inflationary shock in Rwanda during recent
years, it uses chronological data (1990-2009) to analyze the extent to which
changes in Money Supply (M2); in Output (Real GDP); in Exchange rate and
interest rate (Lending rate) influence the inflation. The data consist of the
aggregated data set of 20 years compiled by NBR and NISR. Using a non- linear
and multivariate model, this study estimates the dynamic influence of changes
in M2, in real GDP, in exchange rate and interest rate on Inflation. It is
found that an increase in M2 has a positive and significant influence on
Inflation. Contrary to Real GDP have a negative and significant influence on
Inflation. The study reveals that Money Supply (M2), in Output (Real GDP), in
Exchange rate and interest rate (Lending rate) count for 97.2% variations in
the general prices level (Inflation). Some recommendations are suggested as
emanating from the findings of the study like to pursue a control of monetary
and fiscal policy by government as well as substantial growth in agriculture
sector and other economic activities that contributed in increase of output are
also suggested to moderate the rate of inflation in Rwanda.
DECLARATION
I hereby declare that this submission is my own work and to
the best of my knowledge it contains no materials previously published or
written by another person, nor material which to a substantial extent has been
accepted for award of any other degree or diploma at KIE or any other
educational institution, except where due acknowledgement is made in the
project. Any contribution made to the research by others, with whom I have
worked at KIE or elsewhere is explicitly acknowledged in the Report.
I also declare that the intellectual content of this report is
the product of my own work, except to the extent that assistance from others in
the project's design and conceptions or in style, presentation and linguistic
expression is acknowledged.
(Signed) ....................................... Date
.....................................
APPROVAL
This is to certify that UFITINEMA Richard has carried out
research entitled «Analysis of factors affecting inflation rate in
Rwanda (1990-2009)» under my supervision and guidance.
Date: ......................................
Signed ...................................
Mr. Alain Claude KARASIRA
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