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Tue dole of National Bank of Rwanda from 1995 to 2010

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par Paterne RUKUNDO
National university of Rwanda - A0 2011

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1.2. Statement of the problem

The economic growth toward development has been a major concern of the government of Rwanda by putting a lot of efforts to sustain Rwandan economy and to improve social welfare. Even though Rwandan economy has recovered considerably since the 1994 genocide; the GDP per capita is still low, around 460 US$, and over 56 percent of the population live under the poverty line. The agricultural sector, employing more than two-third of the population is underdeveloped and its contribution to GDP is still small, accounting less than 35 percent. The industry sector too seems not to be in a good position to be an alternative measure since it remained on infant stage and its contribution to GDP has never reached 20 percent. Like many other developing countries, Rwanda was also affected by global economic recession and negative effects were particularly observed in its export sector through low international commodity prices.

The economic declines significantly while the agriculture sector performed well boosted by favorable weather conditions and government green revolution program, the tightened credit conditions in the banking system.

Despite the negative effect of the global economic recession on the external sector, Rwanda managed to record a positive balance of payment, banks to relatively important foreign capital inflows. These inflows offset the current account deficit and allow Central bank to keep a comfortable external position with gross official reserves.

To avoid deeper decline of the growth rate, policy measures were undertaken by government and National Bank of Rwanda. While government kept momentum to stimulate agriculture production, the appropriate policy measures have been taken by central bank for addressing the liquidity crunch and credit to private sector conditions, with the objective of restoring confidence in the bank system.

1.3. Significance of the study


This research helps the student in partial fulfillment of the requirements of attaining a bachelor's degree and also enabled him to gain more knowledge in handling complex problems of management.

The study was intended to encourage the policy makers to closely examine the reasons why the National Bank of Rwanda must put in practice its influence on financial sector for economic stability especially by using monetary policy.

At academic level, this work will constitute an important source of data, both theoretical and practical to researchers, students from different faculties, and all the whole community.

This topic has also the interest to know the relationship of monetary policy and other macroeconomic variables.

1.4. Hypothesis

Hypothesis is an early response to questions that arose in the problem and must be confirmed to achieve a result.

By excess money supply, however there are other factors like, low level of production, high wages, high level of import rising market prices, nominal exchange rates, and macroeconomic instability, etc.

Accordingly, we argue that monetary policy is probably best served by drawing models that summarize different paradigms of the transmission mechanism, or that use of different technical approaches to represent the transmission mechanism. Taking such strategy, diversified approach to inform policy judgments is likely to reduce the risk of making serious policy errors.


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