Determinants of the real gross domestic product growth rate in Kenya, 1973-97
The Kenya Government has pursued stabilization and structural adjustment policies for more than ten years in an attempt to restore and sustain the high growth rates experienced in the 1960s and early 1970s. Despite these measures, real GDP in Kenya has continued to be characterized by positive and negative rates of change of real GDP growth rates. The cyclical fluctuations have been more marked, especially after 1973. The objectives of the study were to identify the factors that determine fluctuations in real gross domestic product (GDP) growth rate in Kenya, measure the relative effect of the factors, and to give policy recommendations. Time-series data were collected from government and world bank publications for the period 1973 to 1997. Data collected were integrated to make it stationary. Ordinary least squares (OLS) method of estimation using time-series programme (TSP) was applied on stationary data. Both linear and log-linear models were run and on the basis of results linear model was adopted. From the linear regression results, growth of capital stock, export growth, financial development, external debt, exchange rate, and real interest rate were found to be significant determinants of real gross domestic product. On the basis of these findings, policy recommendations were then drawn on these variables so as to accelerate the pace of GDP growth rate in Kenya.