Abstract: The efficient prices of transport are a critical component of economic development, globally and nationally. Cost-push inflation to road transport prices occurs when the inflation moves in the same direction as fuel prices, exchange rate of domestic to foreigner currencies and inflation on imported fuels and other Lubricants. Inflation destroys the terms of trade in a country by increasing the price of domestic goods and services more than the regional and the world market price. In additional to this effects from exchange rate developments dampened the effects of the oil price. In Rwandan economy, the macroeconomy has been characterized with the problem of inflation since 1973; Inflation has been mainly driven by various factors. The recent study on determinants of inflation in Rwanda considered international oil price and exchange rates as main determinants of inflation. The transport price is mainly linked to oil price such as fuel and lubricants price index and growth in exchange rate. The objectives of the research were to establish the relationship between determinants of cost push inflations with regards road transport prices in Rwanda, and to assess its causal effects since 2006-2016. The data were gathered in published reports by National Institute of statistics of Rwanda, and National Bank of Rwanda. The review of other related studies were done. The data was analysed using econometric and statistical analysis such as descriptive and correlation design, timeseries analysis, cointegration, granger causality and impulse response were tested. The results from the study revealed that the cost-push inflation which is the increase of inputs used in transport services, has a positive relationship to influence and affects the price of transport in Rwanda. The most influence to transport prices was observed from the change in price of fuel, lubricants, imported inflation of fuel, the fluctuation of exchange rate between US dollars and Rwandan francs. Inflations on transport have less influence than other variables. In other words, if the price of fuel and lubricants increases, it has immediately effect on increase of transport prices. The high growth of exchange rate between US dollars and Rwandan francs has an influence in fixing the price of transport in Rwanda. In additional to this, imported inflation on oil influences its price, which in turn affects the price of transport in Rwanda. The recommendations, along with the findings of this study could be used by policy makers in Rwanda to frame a suitable economy policy with regards to combating imported inflation on inputs used in transport services and to stabilize exchange rate. Moreover, the study found that inflation is mainly accelerated by the supply side (high cost of inputs transport) and external factors (import of fuel and lubricants and other transport services). Therefore, in Rwanda, Cost-push inflation can be efficiently controlled by monetary policy and fiscal policy through government spending, improvement in term of trades (not to depend on imports only). Additional to this the investors of inputs used in transport services should create fuel and other lubricants storage facilities to sustain the transport services and stabilize the transport prices in Rwanda.
Keywords: Cost push inflation, road transport price, determinants of cost push inflation.
Title: Analysis of the Effect of Cost Push Inflation on Road Transport Price in Rwanda (2006-2016)
Author: Mr. BIZIMANA VENUSTE, Dr. JAYA SHUKLA
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
Research Publish Journals
