Abstract

International trade is so much essential for economic growth not only in Rwanda but also worldwide because this world become as village due to globalization where one country’s people can easily buy or sell products to another country. The objectives of this study is to examine impact of international trade on economic growth in Rwanda from 1990-2017. Descriptive data analysis was used and the variable considered here are: Gross Domestic Product (GDP) as proxy for economic growth, Trade Openness (TO), Foreign Direct Investment (FDI).This study was carried out using the Vector Error Correction Model (VECM) estimation method for data analysis using Econometric software (E-Views 8.0. Secondary data was used to conduct this study and the required data was collected from World Bank. Available literature has shown that international trade contributes to economic growth. Empirical investigation reveals that both TO and FDI are positively related to GDP by 0.048617% to 0.193749% respectively. The conclusion drawn from this work is that there is a correlation amongst GDP and its independent variable TO and FDI. This study recommends that the policymakers should improve and strengthen the trade openness and direct investment with the objective of striving for Rwanda sustainable development.

Keywords: Economic Growth, Trade Openness, Export, Import, International Trade, VECM