TITLE:
The Import Trade Forecasting Model Based on PCA: Evidence from Rwanda
AUTHORS:
Elie Nzayisenga, Yongzhong Zhu
KEYWORDS:
Principal Component Analysis, Import Trade, Influencing Factors, Policy-makers
JOURNAL NAME:
Open Journal of Statistics,
Vol.10 No.4,
August
13,
2020
ABSTRACT: A
developing country like Rwanda heavily is keen on international trade for
several essential goods in
the development of an economy. This study investigated the influence of various
factors affecting import trade, and use principal component analysis to
determine an empirical model for a comprehensive analysis of the influencing
factors of import trade of Rwanda using secondary data over the period from 1980-2017. The PCA model showed that Rwanda’s import
trade is principally littered with investment fundamental factors, income
consumption factors, price factors, inflation factors, and savings factors and
the empirical results showed that Rwanda’s import trade is negatively
correlated with the investment fundamental and savings factors, the income
consumption factors, price factor, and the inflation are positively correlated
and therefore the forecast
for the period 2018-2025 revealed that the import trade of Rwanda may
experience an increase. The implication is that unstable price and currency
depreciation cause high income consumption and increased import trade volume.
The study advises policy makers on international trade first to pay attention to the
accumulation of investment and savings checking if providing support for import
trade control and enhance economic security. Second, stabilize the price and manage to
keep inflation low and stable. Third,
better focus
on improving domestic production by not permitting Rwandan currency (Frw) to
lose the worth, thus directly forming the necessity for foreign merchandise for investment purposes to
increase the level of production exportation, which might have a giant positive
impact on saving culture linked to economic growth.