The Effect of Selected Macroeconomic Variables on Government Revenues in Rwanda

Abstract

The purpose of this study was to determine the effect of selected macroeconomic variable on Government revenues in Rwanda. Studies have been done on the effect of macroeconomic variables, for example comparison of macroeconomic performance and volatility in Kenya, Rwanda and Ethiopia. In measuring the determinants of Government revenues in Rwanda, the selected macroeconomic variables were measured such as inflation rate, currency exchange growth rate, average quarterly interest rate and quarterly GDP growth rate as macroeconomic variables. The study used correlation and regression analysis research design. Also the study employed quarterly secondary data which was for a period of nine years from 2006 to 2014 on a quarterly basis. The data was obtained from the Central Bank of Rwanda and National Institute of statistics Rwanda, RRA and Ministry of finance and economic planning Rwanda .The data was analyzed using SPSS 20 .The findings are important to various police makers and finance students etc. the study combined regression and correlation analysis in examining how macroeconomic variables affect Government revenues. The findings of the study indicated that Government revenue has a weak positive relationship with currency exchange growth rate (.183), with quarterly GDP (0.021), interest rate (0.234) and a negative average quarterly inflation rate (.-019). It can also be stated that macroeconomic variables affected Government revenues with an adjusted R2 of 0.176 meaning 17.6% is the variable in the regression model while 82.4% could not be explained by the variables .The main policy recommendation was that the government should develop strong mechanism to mobilize more resources for Government revenues.