Gatsimbazi Innocent, Jaya Shukla, Patrick Mulyungi


Countries all over the world are generally concerned about the performance of the stock markets due to its greater contribution to financial stability of the country and by extension economic growth. Through trading in securities in the stock market, the country is able to mobilize savings and channel it to viable investment opportunities which ultimately lead to expansion of GDP. Several studies have been carried out in Rwanda regarding the stock market performance but none looked at the macroeconomic effects on stock market performance in Rwanda. The study analyzed the effects of exchange rate, GDP growth rate, inflation (CPI) and interest rate (KRR) on stock market performance measured by market capitalization. The study used monthly time series data for a period of 6 years. Engel Granger Cointegration tests were carried out to determine the long run relationship between the variables respectively. The study adopted VAR method in analyzing the effects of the above macroeconomic variables on stock market performance. This involved computing impulse response functions and Variance Decomposition Analysis. The findings indicated that GDP, inflation and exchange rate are negatively significant in affecting stock market performance while interest rate is negatively insignificant. The study recommended that public awareness campaign on the importance of RSE should be carried out, industrialization should be encouraged to avoid high importation, money supply should be regulated to reduce inflation, Key repo rate should be lowered to encourage more borrowing for investment. This study will be important to the government in encouraging more investments through growth of RSE hence employment creation. It’s also important to the management of RSE more so to the policy analysis department in strategic decision making and offering advice to the relevant stakeholders towards achieving growth of securities market. Lastly, the study will also add on the existing literature and act as a basis of reference for future researchers.


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macroeconomic variables, stock market performance, market capitalization, RSE, VAR analysis

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