GOVERNMENT EXPENDITURES AND ECONOMIC GROWTH IN RWANDA : A DISAGGREGATED ANALYSIS
By NYIRIGIRA David
Over the past years, Rwanda has experienced sound economic development and an improvement in living standards. Differently, several researches argue that government expenditures in its sectors of government affect positively and negatively, in the long-run and in the short-run, the growth in the economy. The Keynesian theory states that public expenditure determines economic growth. This study assessed the effects of government expenditures on economic growth in Rwanda, using a disaggregated analysis specifically agriculture, health, defense, education, general public services and transport and communication, social protection and environmental protection using quarterly data from the year 2007 quarter three up to the year 2021 quarter four from Rwanda national budget execution reports, updated macro-economic framework public dataset from the Ministry of Finance and Economic Planning, and the World Development Indicators. The estimation technique employed is the ARDL together with ECM. This study resulted into both short run and long run, positive and negative effects of government expenditures to the economic growth in Rwanda. R2 was tested to test the goodness of data fit, T-test was made to test the individual significance, F-test was used to test joint significance, the lag selection and unit root test were conducted to detect the stationarity, BG-test for autocorrelation was used to test if there is no serial or auto-correlation between the residual (u), Breusch-Pegan-Godfrey Test was made to test if the variance of the residual (u) is constant (Homoscedasticity), Skewness/Kurtosis tests for Normality, was applied to detect residual normality. We hope that this study will contribute to the expansion of knowledge and skills that will help policymakers and stakeholders to orient the government expenditures in different economic sectors and sub-sectors in Rwanda and worldwide.