EMPIRICAL ANALYSIS OF THE DOMESTIC SAVING BEHAVIOUR IN RWANDA

Abstract: This study examines the relationship between gross domestic savings, exports of goods and services, foreign direct investment, population growth rate, final expenditure, and gross domestic income in Rwanda for the period that stretches from 1988-2018. The Johansen co-integration test indicated the presence of a co-integrating relationship between variables. Furthermore, the VECM coefficients revealed that there is a positive significant relationship between gross domestic product, exports, and foreign direct investment and gross domestic savings, but final expenditure and the population growth affect the domestic savings negatively. On the other hand, in the short-run, the exports of goods and services affect domestic savings positively whereas income affects the domestic savings negatively but significantly. Also, the impulse response function results show that the final consumption expenditure can explain the major variations in saving growth in Rwanda.