The financial markets development and economic growth in Rwanda: A causality test

The study examines the relationship between financial markets’ development and economic growth in Rwanda, using regression models, Granger causality tests, and a Vector Error Correction Model (VECM). Results show significant links between variables, highlighting the importance of efficient resource allocation and price stability. The study also reveals bidirectional causality between financial market development and real GDP growth rate, indicating a mutually reinforcing relationship. Policymakers should prioritize measures promoting financial market development, enhancing government expenditure effectiveness, and ensuring price stability. Coordinated economic policies and further research are recommended to foster sustainable economic growth, financial stability, and improved living standards in Rwanda.