Browsing by Author "Mulyungi, Zillah Malia"

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    The Economic Impact of the Public Bond Market in Kenya: A Macro-Economic Assessment.
    (Kenyatta University, 2025-06) Mulyungi, Zillah Malia
    Bond markets play a critical role in influencing key macroeconomic indicators such as interest rates, investment levels, and economic growth. To ease access and foster the development of Kenya’s capital markets—including bond markets—several initiatives have been implemented. These include government regulation and the passing of the Green Bond Act in October 2019, which provides incentives to the private sector to issue sustainable bonds. Despite these efforts, the Kenyan bond market remains relatively underdeveloped, even as the public bond market continues to grow. However, this growth has not been matched by a proportional improvement in core macroeconomic indicators. The objective of this study was to examine the impact of Kenya’s public bond market on selected macroeconomic variables, specifically economic growth and interest rates. In this study, a non-experimental research design was employed. To assess the relationship between bond market dynamics and macroeconomic outcomes, the Autoregressive Distributed Lag (ARDL) model and the Mankiw–Romer–Weil (MRW) model were used. The ARDL model helped to estimate both the short-run and long-run effects of bond market growth on interest rates, while the MRW model incorporated factors such as human capital, physical capital, and technological advancement to estimate long-term growth determinants. Secondary data from both national (KNBS, CBK) and international sources (World Bank, IMF) was used for the period 1990–2022. Analysis of the regression results revealed a negative relationship between public bond market growth and interest rates in both the short and long term, indicating that bond market deepening helps reduce borrowing costs and can potentially stimulate investment. Additionally, the study found a positive association between bond market development and economic growth, underscoring the market’s significance as a macroeconomic instrument for promoting economic development and stability in Kenya. Based on these findings, the study recommends policies that promote bond market deepening as a strategy to lower borrowing costs and enhance long-term economic growth.