Effect of Exchange Rate Volatility on Rwanda Coffee Export between Years 2001-2016

Abstract

This paper investigates the effect of exchange rate and exchange rate volatility on the volume of exported coffee from Rwanda to major importing countries for the period of 2001 to 2016. Generalized autoregressive conditional heteroskedasticity model was used to estimate exchange rate volatility (shock) and autoregressive distributed lag approach was used to estimate the relationship between exchange rate volatility and export volume. Results from this study indicated a positive relationship between exchange rate volatility and coffee export volume in the short-run while long-run effect showed a negative relationship. Therefore, Rwandan agricultural export policies should consider the existence, degree and likely effects of exchange rate fluctuation for coffee in order to design, develop and implement trade policies regarding coffee export.