B. Correlation between Consumer
Price Index and Real Gross Domestic Product
1. Summary of output from SPSS regression analysis
between CPI and GDP
|
Variables
|
Coefficients
|
t
|
P-Value
|
|
Constant
|
-4.678
|
-4.334
|
0.000
|
|
Gross Domestic Product
|
0.661
|
8.203
|
0.000
|
|
R = 0.888 Confidence intervals = 95%
F= 67.335 R Squared = 0.789 Model significance = 0.000
|
2. Graph2: Trends in CPI and GDP,
1990-2009
This shows that there is a correlation between GDP and CPI.
This is known as a weak positive correlation as the line goes up meaning that
if the GDP increases, CPI also increases which differs from the output of
regression analysis of the general model as well as the monetarist theory
whereby an increase in GDP should affect a decrease in CPI.
Consider the observed t-value of Real GDP (8.206) shows that
it lies in the critical region or region of rejection of null hypothesis.
Therefore we accept the alternative hypothesis says that Output has a
significant effect on inflation rate in Rwanda. Since an increase of one unit
in output (Real GDP) affect a decrease of 66.1% in Consumer price index
C. Correlation between Consumer Price
Index and Exchange rate
1. Summary of output from SPSS regression analysis
between CPI and ER
|
Variables
|
Coefficients
|
t
|
P-Value
|
|
Constant
|
-1.003
|
-2.229
|
0.039
|
|
Exchange rate
|
0.893
|
11.541
|
0.000
|
|
R = 0.939 Confidence intervals = 95% F=
133.205 R Squared = 0.881 Model significance = 0.000
|
2. Graph3: Trends in CPI and Exchange
rate, 1990-2009
This scatter plot describes weak positive trend between
Exchange rate and CPI, The value of CPI increases slightly as the value of
exchange rate increases. P-value (0.000) is statistical significant, the
t-values of exchange rate (11.541) lies in the critical region. Therefore, we
reject the null hypothesis and confirm the alternative hypothesis says that
exchange rate has a positive effect on inflation rate in Rwanda. In addition
one unitary change in exchange rate affects an increase in consumer price index
by 32.55%
D. Correlation between Consumer Price
Index and Lending rate
1. Summary of output from SPSS regression analysis
between CPI and LR
|
Variables
|
Coefficients
|
t
|
P-Value
|
|
Constant
|
-4.763
|
-2.444
|
0.25
|
|
Lending rate
|
3.255
|
4.586
|
0.000
|
|
R = 0.734 Confidence intervals = 95% F=
21.034 R Squared = 0.539 Model significance = 0.000
|
2. Graph 4: Trends in CPI and Lending
rate, 1990-2009
In this graph the plots are not on a completely straight line
but some are near each other and a line tends upward therefore there is a
positive correlation though but not strong. The value of CPI seems to be
related to the value of lending rate, but the relationship is not easily
determined.
Considering the result of the regression analysis, t-values of
lending rate (4.586) lies in the rejection area of null hypothesis and is also
statistical significance as shown by P-value (0.000). As conclusion we accept
the alternative hypothesis says that Lending rate has effect on inflation rate
in Rwanda. Since the change in one unit of lending rate affect an increase by
325.5% in consumer price index.
| 
