Economic policies for post-conflict recovery:Comparative study between Rwanda and Burundi

The research tried to investigate the role of economic policies in post-conflict economic recovery. The contribution of the policy reforms made by the governments of Rwanda and Burundi to their economic recovery and development are compared. The main objectives of the study were to identify the role of military expenditure in reducing the risk of new conflict and examine the contribution of domestic investment, foreign aid and FDI to the economic recovery of the two countries. The result from VECM model indicates that domestic investment, foreign aid, foreign direct investment and military expenditure have long run significant effect on economic growth of Burundi and Rwanda. In the short run military expenditure has no any effect on the real GDP in Rwanda but it has significant positive effect on economic growth in Burundi. Also domestic investment does not promote the economic growth and recovery in Burundi. Also the result from Granger Causality test shows that in Burundi; domestic investment Granger causes real GDP. there is unidirectional effect coming from foreign direct investment to real GDP. On the other hand, for Rwanda domestic investment Granger causes real GDP at 5% significance level and there is unidirectional causality coming foreign aid to real GDP in Rwanda. Keywords: Recovery, Economic Policies, Foreign Direct Investment, Domestic Investment