• Karangwa, M., Nyabagabo, T., Ntirushwamaboko, D., & Kalisa M., T. (2025). Drivers of Digital Payments in Rwanda. BNR Economic Review, 21(2), 30–67. Available here

• Kamali, I., Dushime, C., & Nyabagabo, T. (2025). Tracking the Operational Transmission of Monetary Policy in Rwanda: Novel PCA Based Approach. BNR Economic Review, 22(1), 46–81. Available here

• Nyabagabo, T., & K. Manayubahwe, L. (2024). Monetary Policy and Inflation Tolerance Ranges: Applications to Rwanda. BNR Economic Review, 21(1), 71–102. Available here

• Commodity Price Shocks, Inflation, and Monetary Policy Amid Uncertainty [pdf], Accepted BNR Economic Review 2025

We examine the non-linear pass-through of global food and oil price shocks to domestic inflation in Rwanda, evaluate the propagation of second-round effects from domestic food and energy inflation to core inflation, and analyze the monetary policy response to commodity price shocks under conditions of external volatility. Using a Bayesian Vector Autoregressive (BVAR) model, the study finds a significant and rapid pass-through of international food prices to headline inflation. In contrast, the pass-through from oil prices is more moderate and delayed, likely due to the comparatively higher use of solid fuels compared to liquid fuels in Rwanda. The paper finds significant second-round effects, with food inflation notably impacting core inflation. To study the response of monetary policy to global commodity price shocks, a small open economy New Keynesian (SOE-NK) model was calibrated for Rwanda. The models key finding, derived from a sensitivity analysis, is that the pass-through of commodity price shocks is state-dependent, intensifying significantly during periods of elevated global supply chain disruptions and geopolitical tensions. In such volatile periods, a more aggressive monetary policy tightening is recommended to stabilize inflation, which, despite causing a sharper short-term output contraction, facilitates a quicker subsequent recovery by anchoring inflation expectations. 

• Monetary Policy and Inflation Tolerance Ranges: Applications to Rwanda [pdf]Available here] [Replication Code](2024)

This paper studies the implications of using inflation tolerance ranges (or target bands) in the conduct of monetary policy. In doing so, the paper also examines the appropriateness of the current official inflation target band of the National Bank of Rwanda (5± 3%). In a stylized New Keynesian Model calibrated for Rwanda, the study adopts a state-dependent policy rule approach , in which monetary policy operates under two regimes: the lower-boundary regime (when inflation is below 2 percent) and the upper boundary regime (when inflation exceeds 8 percent). Within this framework, a controlled tolerance parameter is used to compare the 5± 3% tolerance range against wider inflation tolerance ranges, relying on impulse response functions to analyze the behavior of monetary policy in reaction to an unexpected inflation shock. We deliberately exclude narrower ranges from our analysis to avoid the pitfalls of unanchored inflation observed in the empirical data. We find the following main results across different iterations. First, higher inflation tolerance ranges magnify the asymmetric response of monetary policy, where it reacts aggressively to deviations from the upper boundary than in the lower boundary regime. Second, higher inflation tolerance ranges reduce the likelihood of inflation convergence back to the benchmark target (middle value of a range) following an inflation shock. Third, we find that higher tolerance is costly, as the central bank must later compensate with aggressive measures to bring back inflation to the benchmark target, leading to a larger output loss. Compared to wider tolerance ranges, these results suggest that the 5± 3% tolerance range remains appropriate for Rwanda. 

• Interest rate Risk and the Transmission of Monetary Policy in Rwanda [pdf] (2023)

I propose a bank model to explain how interest rate risk affects the bank lending channel of monetary policy transmission in Rwanda. In the model, banks aim to maximize their net interest income gaps (NII) while maintaining their balance sheet identity at equilibrium, resulting in optimal lending and deposit rates being determined by the pure interest rate and its variability (interest rate risk). The resulting variability of lending and deposit rates decreases NII, increasing the banks’ internal cost of financing. At any given lending rate, this leads to lowered lending as banks seek to retain more earnings. Using monthly time-series Rwandan data from 2006 to 2022 and a Distributed Lag model, I estimate the relationship between market-rate volatilities and the lending spread: a newly constructed measure of monetary policy transmission. In line with the predictions of the bank model, results indicate that an increase (1 percent) in the volatility of lending rates increases the lending spread by 0.39 percent over three months, while an increase (1 percent) in the volatility of deposit rates increases the lending spread by 0.20 percent over a similar horizon. These findings suggest that interest rate risk negatively impacts the transmission of monetary policy in Rwanda. Macroprudential regulators should actively monitor the build-up of interest rate risk in the banking sector to help safeguard and improve the transmission of monetary policy. 

• Dominant Currencies and Terms of Trade: The Case of Rwanda.  [pdf] (2022)

In light of recent global trade wars, and the use of currency manipulation in gaining trade competitiveness throughout history, this study aimed to investigate if the valuation of Rwanda’s currency is related to its exports’ competitiveness. Further, reflecting advances in the international macroeconomics literature, especially on the topic of Dominant Currencies explored by several authors recently [(Gopinath et al., 2016); (Boz et al., 2020); (Gopinath et al., 2017)], the study moves away from the standard Mundelling-Flemming framework by empirically modelling Rwandan real exports using both the domestic real effective exchange rate (reerw) and that of a globally dominant currency, the USD (reerus). In doing so, the study also in part becomes a test on whether the Dominant Currency Paradigm (DCP) holds in the case of Rwanda. The results confirm the significance of Rwanda’s REER in determining export performance in the long term. However, contrary to the Dominant Currency Paradigm, the U.S. dollar’s influence over Rwanda’s exports manifests only in the short-term through volatility effects, suggesting the relevance of exchange rate policies in influencing trade competitiveness. The study calls for further research into the influence of dominant currencies on small economies’ trade. 

• The Pass-through of Global Commodity Price Shocks to Inflation in Rwanda   [pdf] (2023)