Effect of Treasury bond on Economic Development of Rwanda
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Abstract
Treasury bonds are an important component of a country's financial system and represent a critical component of National Bank of Rwanda monetary policy. The purpose of this study was to examine the effect of Treasury bond market development on economic growth in Rwanda Stock Exchange. The target population of this study was 12 employees dealing and working with Rwanda Stock Exchange. The study adopted an open-ended questionnaire for data collection. Data was processed and analyzed using SPSS computer based software version 21. Results from the study showed that investors strongly appreciated the profit they get from Treasury bond. Further the Results revealed that Treasury bond is the most significant in explaining the economic development of Rwanda with a significance of 0.000 which is less that a p-value of 0.05 and beta value is 0.728. Pearson correlation coefficient, (r=0.728) shows that there is a positive and high correlation relationship between stock market and economic development where the P-value (0.000<0.05). From the findings, both bond market variables of size and liquidity have significant positive relationship with GDP. It can therefore be concluded that Treasury bond market development has a significant positive effect on economic growth in Rwanda. The study recommends that the Capital Markets Authority should also hasten the introduction of the new products into the capital markets such as derivative instruments (bond options, futures, swaps) and have necessary regulatory framework in place to make the bond market even more vibrant.