This research paper aims at analysinginfluence ofmonetary policyand investment using the case of Rwanda data Bank. The research design of this paper was based on quantitative approach. This paper will help the researcher to get academic promotions which will be
beneficial for us, for society and for University itself since it will be the academic reference for other scholars. This paper used secondary data, and this was based on a set of observations for 30 years of Rwanda’s economic data.Theresultsfindingsshowed that the dependent variable (Investment) and all the independent variables (interest rate, exchange rate, money supplyarenot stationaryat level. The researcher continued to test them at first difference and therefore all variables become stationary, which indicates that all the variables are integrated of same order at the first difference I(1). The results indicate that there is long run equilibrium in themodel. In the firstyear the real INV (100%) is fully explained by its own innovation which indicates the exogenousnature. However next 9 periods showvery little fluctuation and by the 10th year, it is reduced to 52.1%, decomposition of IR indicates (88.7%) effect of it sown innovation and INV (11.3%) in the first period and in the last period it is explained only (22.2%) by INV. EXR decreased to (71.8%) in the last period and IR (15.1%), 4.9% for MS and 0.2% for CRED. Innovationin MS for the first period is explained (76.2%) by itself and (10%) by IR and 13% for INV and atthe 5thperiod MS underwent a very little change (32.9%) innovation is explained by IR,EXR and INVrespectively affecttheinnovation by (21.3%), (23.9%) and 14% Thus, with the conclusions made with respect to the effectiveness of
monetary policy components on investment, on the independent variables, the regression indicates that there is a significant positive relationship between the interest rate, money supply and investment. This implies that government should put emphasis on interest rate and money supply sector to enable more people to get loans from commercial banks to continue the improvement of investment to stabilize the level of interest rate to attract even investors from outside. From an evaluation of the overall analysis and results, it can be concluded that the stated independent variables have had significant long-run impacts on investment in Rwanda. Considering this, this paper followed the usual approach in assuming that investment shares as positive relation with monetary policy channels. Based on the findings and their implications reported. This paper recommended the policy measures to help government achieve its investment plans in next generation.
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