Analysis of the effect of foreign direct investment on poverty rate: A Rwandan perspective

This study investigated the multifaceted effect of foreign direct investment on poverty rate in Rwanda by considering also the influence of political stability , employment opportunities and trade openness. This study applied ARDL(autoregressive distributed lag model) and Error correction model (ECM) for econometric analysis with time series data from ۱۹۹۴-۲۰۲۲. The study showed a mixed results. From the results, foreign direct investment ,political stability and employment reported a significant negative effect on poverty rate in the long run meaning they play a crucial role in reduction of poverty rate in Rwanda but both reported a significant positive effect on poverty rate in Rwanda in short run meaning both doesn’t contribute in poverty rate alleviation in short run. The study also reported a significant positive effect of trade openness on poverty rate in the long run indicating that trade openness doesn’t help to reduce poverty rate. However, a significant negative effect of trade openness on poverty rate was recorded in short run suggesting a strong contribution of trade openness on poverty rate reduction in Rwanda in short run.

Keywords:

Poverty rate , Foreign direct investment , Political stability , ARDL