A MULTIVARIATE TIME SERIES ANALYSIS OF ECONOMIC INDICATORS IN RELATION TO EXTERNAL PUBLIC DEBT STOCK DYNAMICS: A CASE STUDY OF RWANDA
Abstract
The rapid rise of the national borrowings level around the world Due to the financial crisis of 2007/2008 has led to several governments’ fiscal issues. In Rwanda alone, the level of borrowed funds rose from19.4% in 2010 to 59.7% in 2019; thus, more studies to understand how different economic indicators affect the public borrowings are needed. The current study has analyzed the economic indicators related to government debt accumulation in Rwanda by applying a multivariate time series analysis. The goals of the research were; to check for stationarity of the variables, to perform co-integration analysis and to forecast the external government borrowings level in the next five years. In this study, stationarity, co-integration and forecasting methods were executed. Historical data was covering the period from 1973 to 2022. Data collection involved secondary data obtained documentation on information from World Bank (W.B) and National Institute of Statistics of Rwanda (N.I.S.R.). The research conducted Augmented Dickey-Fuller test (ADF) for unit root to check for stationarity but also Johansen co-integration technique was utilized before applying Vector Autoregressive model (VAR) for forecasting the state borrowings. This study aimed to ascertain the influence of each selected variable on the state borrowings accumulation. This research found all the variable under the consideration to be stationary after first differentiation and there was no long-term association found between them. The forecasting techniques expect the foreign national borrowings to rise up to 74.20027 % in 2027 of the gross national income.
Key words: External Debt, Internal Debt, Inflation and GDP
CITATION: Mugisha, G., Nyabwanga, R., & Nyakundi, C. (2024). A multivariate time series analysis of economic indicators in relation to external public debt stock dynamics: A case study of Rwanda. The Strategic Journal of Business & Change Management, 11 (3), 471 – 492. http://dx.doi.org/10.61426/sjbcm.v11i3.3039
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DOI: http://dx.doi.org/10.61426/sjbcm.v11i3.3039
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