MST-Department of Econometrics and Statistics

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Fuel in Kenya: an analysis of household choices in major Kenyan cities
(Kenyatta University, 2014) Kamau, David Waweru; Okeri, S. O. M.
In the developing nations of Sub-Saharan Africa, providing households with modern energy services is a critical step towards development. A large majority of households in the region rely on traditional biomass fuels for cooking, which represent a significant proportion of energy used in the domestic setting. The disadvantages of these fuels are many: they are inefficient energy carriers and their heat is difficult to control; they produce dangerous emissions; and their current rate of extraction is not sustainable to the environment. Transition to clean fuels such as liquefied petroleum gas (LPG) or electricity would resolve many of these issues as they do not produce dangerous particulate emissions, and are commercially viable, offering a number of socio-economic advantages over traditional options. This study applies a multinomial logit model to fuel choices and patterns of cooking fuels in urban Kenyan households. A large microeconomic dataset from Kippra‘s Comprehensive study and Analysis on fuel consumption patterns in Kenya (2010) is employed to carry out the analysis. The results show that in addition to income, there are several socio-demographic factors such as education and sex of the head of the household, which are important in determining household fuel choice. To encourage clean fuel use, the authorities should carry out public education campaigns and ensure availability of these fuels in all areas to avoid harmful effects of biomass fuels and kerosene, more modern and efficient appliances should be made available at affordable rates to ensure more efficient use of these forms of energy
The relationship between informal sector size and economic growth in Kenya
(Kenyatta University, 2014) Muthyoi, Alexander; Njaramba, Jennifer; Manyasa, E.O.
Over the years, there has been an ongoing debate in the literature on the expansion of informal sector in Less Developed Countries. In Kenya, just like other less developed countries, informal sector commonly known as Jua Kali, has been playing a significant role in job creation. The sector also plays a key role in contribution to the country's Gross Domestic Product, provision of certain goods at cheap prices hence leading to household savings. The sector also provides competition to formal sector leading to cheap prices and innovativeness. In 1998, the informal sector contributed 18.4% of the country's GDP. The purpose of the research was to explore the contribution of Informal Sector size in economic growth in Kenya from 1980 to 2010. The scope of the study covered the period from when the government of Kenya officially came up with comprehensive policy framework on informal sector. Specifically, this study evaluated the relationship between the real Gross Domestic Product per capita growth and growth of informal sector employment in the country. To achieve this objective, the study used time series data obtained from government of Kenya official documents. The study showed that there is a relationship between the country's informal sector size and economic growth. The findings of the study would assist in policy formulation on the growth of the informal sector size.
Public Agricultural Research and Development Expenditures and Economic Growth in Kenya
(2014-03-07) Maluku, Stephen Mwongela; Ombuki, C.; Okeri, S. O. M.
Research and Development (R&D) plays a fundamental role in economic growth in that it provides impetus for new knowledge and technologies which contributes to growth of the economy. Existing literature identifies knowledge expansion prompted by expenditures on R&D as a key propellant of economic growth. The literature provides evidence that R&D investments translates to discoveries which transforms resources into products, processes and services and thus leads to growth of the economy. Inspired by the desire to grow the economy, the public and the private sector in Kenya has overtime allocated resources to finance public agricultural R&D. In the 1980s, the expenditures varied significantly ranging from between 2.3 and 3.5 billion shillings which improved in the 1990s to range at between 3.5 and 4.1 billion shillings. In the 2000s, agricultural R&D expenditures fluctuated at between 3.9 and 4.4 billion shillings. The study sought to determine whether the expenditures on public agricultural R&D impact on GDP growth in Kenya. The study's guiding question was, does investments on public agricultural R&D impact on GDP growth in Kenya? The study used a causal research design and published annual data on public agricultural R&D intensity and GDP growth for 31 years between 1980 and 2010. Diagnostic unit root tests, co integration tests, Error Correction Models (ECMs) estimation and an advanced Granger causality test within an ECM were conducted in an effort to establish whether public expenditures on agricultural R&D impact on GDP growth in Kenya. The co integration test results and the ECMs estimation results indicated that public agricultural R&D intensity and GDP growth have a long run relationship. A Wald F test on the ECMs showed lack of short run causal effects between the variables. The estimated coefficients in both ECMs established a long run unidirectional causality in that public agricultural R&D intensity causes GDP growth and not vice versa.
Response of economic growth to domestic borrowing, governance and market reforms in Kenya
(Kenyatta University, 2015) Kimolo, Dorothy Ngina
The Kenya vision 2030 aims at achieving a sustained 10 per cent per annum growth rate in the economy by 2012 as well as reducing domestic debt levels to below 25 per cent of GDP but these targets have not been achieved. Post independent Kenya has also experienced changes in governance as well as market liberalisation. The study therefore aimed at analysing the response of economic growth to domestic borrowing, governance and market reforms. The study used time series data for 1971-2013. A multivariate linear regression model was used to analyse the response of economic growth to domestic debt in Kenya while dummies and interaction terms were used to capture the moderating effects of changes in governance and market reforms on the response of economic growth to domestic borrowing in Kenya. After the regression, diagnostic tests were performed on the models to check their statistical soundness. The models passed all the tests so the results were considered reliable. The study found that economic growth responded negatively to domestic borrowing. Economic growth responded negatively to Private Consumption and Inflation while it responded positively to growth in Private Investments and Net exports. Market reforms were found to have no significant effects on economic growth. Economic growth in the third governance under President Mwai Kibaki was higher than in the governance regime under President Jomo Kenyatta. Domestic debt and the governance under President Mwai Kibaki had own significant effects on economic growth but did not have any joint effects on economic growth in Kenya. From the results the study recommends that the government should pursue policies aimed at reducing growth in domestic debt in Kenya to minimize the negative effects on economic growth. The government should also work on measures to curb inflation while ensuring private investments and net exports are on the rise.
Effects of Infrastructure on Foreign Direct Investment in Kenya
(Kenyatta University, 2015) Wekesa, Carol Teresa
Kenya's FDI inflows as a percentage of GDP have been increasing negligibly over the last five years, increasing from 0.4 percent in 2010 to 0.9 percent in 2013. This is despite the fact that, since the year 2000, there has been increased budgetary allocation to the infrastructure sector. Empirical evidence has shown that quality infrastructure lowers the cost of doing business and improves the investment climate, thus attracting FDI. However, Kenya still has visible signs of infrastructure in-adequacy and inefficiencies. These include congested roads, erratic power supply, long-waiting lists for installation of telephone/power lines, shortages of clean and safe drinking water, and overloaded waste disposal system and pollution. This study, therefore, sought to determine the effects of transport, energy, communication, and water and waste infrastructure development on FDI inflows in Kenya. The study used annual secondary data, spanning 1970 to 2013, sourced from Central Bank of Kenya, World Bank and UNCTAD. Multiple regression analysis was done. It was established that, improved transport infrastructure, communication infrastructure, water and waste infrastructure, exchange rate, economic growth and trade openness are important determinants of FDI inflows into Kenya. Hence, for Kenya to attract more FDI, the government should modernize ports and airstrips, tarmac more kilometres of roads, construct more kilometres of rail line, improve port infrastructure to increase container port traffic, increase broadband internet connectivity, expand technical training institutes, harness innovative ideas for increased export of ICT goods and services, construct and rehabilitate water and waste management systems. It should further strengthen the Public Private Partnerships (PPPs) framework for more private sector participation in infrastructure development; strengthen tax collection mechanisms, sealing loopholes for tax evasion, and ensure more resources are directed towards development vote as opposed to the recurrent vote. Innovative infrastructure financing models should be sought. The use of infrastructure bonds and pension funds are examples. The government should afford investors a conducive investment climate, and at the same time prioritize the implementation of national cohesion and anti-terrorism programs.
Effects of union wages on management staff wages in the banking industry in Kenya
(Kenyatta University, 2015) Kimathi, Mark Murithi
The Kenya banking industry is made of the Central Bank of Kenya as the regulatory authority, 44 banking institutions, 5 representative offices of foreign banks, 8 deposit taking micro finance institutions, 2 credit reference bureaus and 112 foreign exchange bureaus. Wages in the banking industry have been increasing over the years but they have not kept pace with the rate of inflation. The average annual wage per employee in the banking sector increased from Kes 10,424 in 1968 to Kes 1,385,773 in 2013.The worst erosion in the purchasing power of banking employees' wages occurred from 1972 to 1994. The real average wage per employee per year declined from the highs of Kes 1,300,152 in 1972 to the lows of Kes 364,196 in 1994. The real average wage per employee per annum recovered from 1994 to 2008 .The real average wage increased from Kes 364,196 to Kes 1,154,598 during this period. From 2008 to 2012, the real average wage per employee per year declined to Kes 910,431. There was a slight improvement in 2013 where the real average wage per employee was Kes 989,061. The average wage of management staff increased from Kes 298,785 in 1994 to Kes 1,674,419 in 2009. From 2009, the average wage of management staff has been on a decline to Kes 928,762 in 2013. The average wage for unionisable staff on the other hand has been increasing gradually from Kes 82,068 in 1994 to Kes 1,333,296 in 2013. Decline in workers' purchasing power affects employees in that they are not able to maintain the standards of living they were accustomed to. This study sought to establish the effect of union wages on management staff wages. This was undertaken by first establishing the determinants of negotiated wages in the banking industry. A wage model was fitted with time series data for the period 1968 to 2013 and the estimated results showed that gross profit before tax, labour productivity and previous period wage of unionisable staff were important determinants of negotiated wages. The other variables, namely, legislated minimum wage, number of union staff, unemployment rate, inflation rate and union density were statistically insignificant in determining negotiated wages. To determine the effect of union wages on management staff wages in the Kenya banking industry, a linear model was used in which wage of management staff was regressed on gross profit before tax, labour productivity, number of management staff, previous period wage of management staff, unemployment rate, wage of unionisable staff and inflation rate. Time series data for the period 1968 to 2013 was used. The results revealed that number of management staff, gross profit before tax, previous period wage of management staff and wage of unionisable staff were statistically significant determinants of management staff wages. The other variables were found to be statistically insignificant. The study confirms the need of coming up with a way to measure labour productivity that is acceptable to all the players in the banking industry. It also revealed the need to ensure that management staff wages do not lag behind as the wages of unionisable staff rise.
Capital Mobility and Investment in the East African Community for the Period 1999 - 2012
(Kenyatta University, 2015) Mutua, Fridah Joy Karambu
The East African Community (EAC) is a regional economic integration grouping which comprises of Kenya, Uganda, Tanzania, Rwanda and Burundi as member states. This trading bloc was established through a treaty and also on the account of ratification by the parliaments of the member states on ao" November 1999 and came into full force on 7th July 2001. The purpose of the EAC was to bring about economic, political, social and cultural integration in order to allow for augmented trade, investment and economic growth. In addition the EAC Industrialization Strategy for years 2012 to 2032, for instance required that the intra-regional exports relative total manufactured imports for the trading bloc to grow from 5% to approximately 25% by 2032. At the same time the growth of manufactured exports in relation to total merchandise exports from an average of 20% to 60% amongst other objectives However the East African Countries suffer from low savings rates, the bond market which is immature, a small investor base, and the secondary markets that experiences a lot of illiquidity. The ease of doing business rankings indicated that the East African countries were not an attractive investment destination in spite of the many reforms which have been undertaken. Moreover this was also reinforced by the Global Competiveness report 2013 hence the need for the EAC to develop policies that facilitate its own citizens to invest in this trading bloc. Capital mobility on the other hand is an avenue, which can be used to ascertain the above goals are achieved. Capital mobility will permit the flow of funds across countries which in turn will facilitate investments to be undertaken therefore augmenting these countries economic growth. For this reason numerous studies have been carried out using Feldstein Horioka Hypothesis as theoretical framework and with different methodologies to measure the level of capital mobility in Africa. The objective of the study was to evaluate the level of capital mobility in EAC, and to determine the drivers of investment in EAC using the data collected from the World Bank for period 1929 to 2012. The study employed the Panel data fixed effects (PCSE) model and found out that there was moderate capital mobility in the EAC trading bloc. In addition the key financiers of domestic investments are the domestic savings, foreign aid, FDI and government expenditure. Moreover openness of the economy and the level of capital mobility facilitated the absorption of new investible opportunities in the EAC.
Efficiency analysis of the agro-processing industry in Kenya
(2015) Ndicu, Simon; Muchai, Diana N.; Gachanja, Paul Mwangi
This study will seek to provide empirical evidence on technical efficiency of the Kenya Agro-processing industry. Agro processing is the process or action taken by manufacturers of converting primary (raw) agricultural products into consumable commodities suitable for consumption. This subsector is involved in processing, packaging and value addition of the fresh agricultural produce produced through activities of farming , livestock keeping and forestry by the Kenya Agricultural sector of tea, coffee, sugar cane, fruits, vegetables, milk, Honey, meat, grains and barley .The major problem of the Agro-processing industry is that it has been inefficient in terms of value addition to these agricultural produce and Kenya is known to be a net exporter of raw agricultural produce instead of high quality value added products .This study will seek to determine the efficiency estimates of the agro-processing industry and analyze the trend in efficiency changes under the period under consideration .There after policy recommendation for the agro-processing industry will be provided. Panel data covering three year (2011, 2012, and 2013) for 30 firms in the Agro-processing industry will be collected from the ministry of industrialization, Kenya daily board, Kenya sugar board, KTDA, KNBS and EPZ departments for the said periods. This study will treat salary and wages, plant equipment and machinery and raw materials as the input variables while the net sales of the firms will be the output variable .Econometric production frontiers will be estimated for the Agro-processing industry in each period and the analysis will be done based on results of the stochastic frontier analysis. Technical efficiency of the Agro-processing industry will be computed from the results of the estimated stochastic frontier model and changes in technical level will be observed over time and between the beverage subsector, food subsector and the non-food sub sector .The findings of this study will be used to draw sound conclusions and recommendations that will be very useful to enable efficient resource allocation and cost of production minimization to the firms and to the policy makers of the Kenya ministry of industrialization and enterprise development
Effects of East African community customs union on trade and economic growth in Kenya
(Kenyatta University, 2015) Boiwo, Silas Tuitoek
During the 1990' s the world experienced a new wave of regional integration agreements (RlAs) that reached unprecedented proportions. The increasing importance of regional integration agreements and in particular their extraordinary expansions during the 1990's are among the most salient developments of the international trading system and its believed to be a vehicle for the promotion of trade and economic growth. The main driver for increasing number of Regional Integrations Agreements on the African subcontinent is the need to increase regional co-operation by creating a unified economic bloc and building blocs for stronger integration between member countries that will eventually lead to the creation of an African Economic Community. The East Africa Community was resurrected in 1999 which was transformed to a custom union in the year 2005. One of the objectives of the custom union was aimed at improving trade between the member states. To facilitate this, transitional arrangements have been put in place to liberalize inter and intra-regional trade among the partner states. The objectives of this study were to determine the trade effect of the EAC custom union and to analyze the effect of intra-EAC trade on economic growth in Kenya. Time series data for the years 2000 to 2013 was used for analysis. The coefficient of the EAC dummy used to measure the effect of custom union was found to be statistically significant and positive. This finding shows that after the formation of the custom union, the volume of trade in Kenya has increased proportionately by 0.9083 percent. For the effect of the custom union on Kenya intra-EAC trade, the EAC dummy coefficient was also found to be positive and statistically significant. This means that after the formation of the custom union, the GDP of Kenya has proportionately increased by 0.6214 percent. The study revealed that the formation of the EAC Custom Union has had positive effect on trade and economic growth in Kenya. The findings also show that after the formation of the custom union, increase in the volume of trade for Kenya has been realized. Therefore the formation of the EAC· customs union is an important step in the process of deepening regional integration among the member states.
Effect of Inflation on Minimum Wages in Kenya
(Kenyatta University, 2015) Dayan, Peter
Public expenditure on education and education outcomes in Kenya
(2015) Mbaya, Joyce Karoki
Investing in education has continued to be of concern for many developing countries with a view to improve their human capital .The Kenya government over the years has put a lot of emphasis on education sector through various policies to spur economic growth by implementing various policies that has impacted the education sector as well as the economy. The purpose of this study is to find out the effect of public expenditure on education on economic growth in Kenya from 1980 to 2010 for all the variables. The specific objectives of the study is to investigate the effect of the components of public expenditure on education on economic growth in Kenya. Using annual data, ADF and PP tests will be utilized to check the stochastic properties of the variables. Long-run relationship among variables will be confirmed through Johansen and Juselius cointegration test whereas the long-run and short-run dynamics are observed by ECM specification. Significance of the Study The government commitment to funding the education sector is to allow its people gain skills and knowledge that can help improve their individual earning as well as lead to economic growth. The government has a challenge of allocating the meagre resources to different sectors of the economy hence the need to understand the effects of investing on education. It is expected that the study will help policy makers in determining which component between recurrent and development that requires more allocation of public funds in the education sector to ensure that the quality of education is not compromised. In Kenya studies on PEE and economic growth are scarce, therefore this study will seek to add knowledge to the body of policy makers and stimulate further interest for more research in the area under study.
The effect of public debt on private investments and economic growth in Kenya (1980-2013).
(2015) Kamundia, Susan .W.; Gitahi, Stephen; Mwilaria, Shadrack
The Kenya vision 2030 aims at achieving a 10 percent per annum growth rate in the economy. Investments have been identified as a major channel through which this objective can be met. The government has undertaken various public investments to fuel economic growth. However, for this to be even more effective, private investments have to be taken into consideration. The government has taken various measures such as relying more on external debt to avoid crowding out private investments and consequently promote economic growth. Despite these efforts, private investments and economic growth have remained low. This study aims at finding out what the effect that public debt has on the level of investment and consequently on economic growth. The study will use time series data from 1980 to 2013. Autoregressive Distributed Lag modelling will be applied in the estimation of the model as it works with both I (0) and I (1) variables. Granger causality test will be used to determine the presence and direction of causality between public debt and economic growth.
Technical Efficiency of Small Scale Fish Farming in Kiambu County
(Kenyatta University, 2015) Yegon, Kiplagat Benard
Fish production systems in Kenya are still under developed with the yields hardly exceeding l.Ockg/mvyear. The farmers in the Country are reported to be producing between 0.05- 1.04kg/m2/year as compared to 3 to 5kg/m2/year that the Fisheries Research Institutions recommend. This necessitated analysis of the level and determinants of technical efficiency in small scale fish farming in Kiambu County. A structured questionnaire was administered to a total of 94 small scale fish farmers that were randomly selected from six sub-counties out of the 12 sub counties of Kiambu County. A Cobb-Douglas stochastic production function was used to estimate the level of technical efficiency using Maximum Likelihood Estimation method. The predicted farm specific technical efficiency ranged between 0.1847 and 0.9537 with a mean of 0.4115. The study revealed that fish feed, size of the pond and fertilizer application were statistically significant in the production of fish in the study area. Based on these findings the farmers needs to increase the size of the fish ponds, access quality fingerlings, fish feed and fertilizer in the right proportions. The age of the farmers, education level, farming experience and access to extension services affected technical efficiency negatively. On the other hand household size and access to credit services influenced technical efficiency positively. Male operated fish farms were found to be more technically efficient than female run farms. The government needs to improve extension coverage to many farmers to address simple farming anomalies such as excess utilization of feed and inaccessible yield improving technologies. Policy should be suggested to be directed to encourage the entrepreneurs in fish farming to access credit facilities to improve on their fish farming. The government should also encourage the most educated and young population to take up fish farming husbandry and not leave it to the old age farmers.
The impact of HIV/AIDS expenditure on health outcomes in Sub-Sahara African countries
(Kenyatta University, 2015) Ndung'u, Gabriel Waweru
Over the last three decades, the global HIV/AIDS prevention community has developed a portfolio of proven strategies that can be deployed to reduce the risk of acquiring or transmitting HIV. The response to HIV/AIDS pandemic is related to international health outcomes with three of the eight millennium development goals being allied to increase spending on health issues. In Africa, funds have been channeled to subsidize the delivery of AIDS education and health care service which will benefit citizens in improving health status, raising literacy as well as expand opportunities for economic and social wellbeing. At the end of 2011, 0.8 percent of adults were living with HIV globally, with sub-Saharan Africa accounting for 69 percent of people who were living with HIV worldwide. This represented a significant increase from 1990 where the HIV prevalence rate was 0.21 percent. The incidence rate has also revealed a rising trend. In 1990, incidence rate was 0.03 percent and in 2011, the rate stood at 0.04 percent. On the other hand, there has been a rising trend in HIV/AIDS expenditure from $ 4 Billion in 2002 to $ 17.1 Billion in 2008. Even though many resources have been used to combat HIVIAIDs in sub-Saharan African countries, the actual effect of this spending has not yet been empirically assessed. The main objective of this study was to establish the effect of HIV/AIDS expenditure on health outcomes in sub-Saharan Africa. To achieve the specific objectives of this study, HIV/AIDS prevalence rate, HIV/AIDS Incidence rate and HIV related mortality rate were regressed on HIV/AIDS expenditure, number of people tested, number of antiretroviral therapy, preventions of mother to child transmissions, doctor population and literacy rates. The study adopted a longitudinal research design whereby data from 11 sub-Saharan countries on HIV/AIDS expenditure and health outcomes over a number of years was analyzed. The study conformed to a number of studies that have shown that there is a relationship between HIV/AIDS expenditure and health outcomes. The study recommended increase HIV/AIDS expenditure allocations that will in turn lead to improved health outcomes in sub-Sahara African countries.
Technical Efficiency of Technical, Vocational and Entrepreneurship Training Institutions in Kenya
(Kenyatta University, 2015-02-03) Kariuki, Paul Wanjora
The three educational systems of primary, secondary, and tertiary levels in Kenya are increasingly faced with resource scarcity and increasing unit costs. The government of Kenya and other international organization have over the years allocated more funds to basic education resulting to underfunding in tertiary particularly TVET institutions. But since 2005 the government has recognized the potential contribution these institutions can make especially towards the realization of The Kenya Vision 2030. The governments in collaboration with external donors have since then channeled significant amount of funds to improve TVET education. A TVET education system in Kenya was studied by comparing used resources with education outcomes. This study sought to establish the level of efficiency in TVET institutions and the determinants of the technical efficiency. Technical efficiency in TVET education systems across Kenya was assessed through Data Envelopment Analysis (DEA) which is a non-parametric method. The DEA results were further subjected to regression analysis using Tobit model to determine the determinants of technical efficiency of TVET institutions. Output was defined as students' educational achievement, measured by results obtained on standardized tests applied nationwide and graduation rate. Inputs considered were; student enrolment, teaching staff, non-teaching staff and physical facility index. The results of the study show that the overall efficiency of TVET institutions in Kenya is 79.4%. Using the Malmquist index it was clear that total factor productivity in TVET was increased in the period 2009-2011. Further, the study found out that the qualification of teaching staff measured by the number of teachers with advanced degree affected the performance of TVET institutions. The other factor that was found to determine efficiency was the proportion of engineering/science in comparison with art-based courses offered by these TVET institutions. Those TVET with high proportion scored less in terms of technical efficiency. This was could be attributed to the fact that engineering/science based course are more demanding in terms of input resources such as capital equipment. The TVET institutions in Kenya are not well equipped with adequate and modern equipments. Factors such as location of the TVET, boarding facilities and flexibility of modes of learning were found not to have significant influence of efficiency of TVET institutions. The study recommends that government and TVET institutions management should come up with a policy to promote acquisition of higher academic qualifications by the teachers. Equipping TVET institutions with proper, adequate and modern equipment will go a long way in enhancing performance in engineering courses. The TVET must produce the artisans, technicians, craftsmen and technologists required to fulfill the needs of Vision 2030.
The Relationship among Real Exchange Rate, Current Account Balance and Real Income in Kenya
(Kenyatta University, 2015-02-26) Wanjau, Boniface Muriithi
International Tourism Demand and its Determinants in Kenya.
(Kenyatta University, 2015-02-26) Mbui, David Kirimi
Tourism is a major contributor to economic growth in many countries. In Kenya, tourism is a significant economic activity contributing greatly to the gross domestic product, foreign exchange earnings as well as employment. In 2011, the sector contributed 13.7 percent of Gross Domestic Product, about 18.6 per cent in foreign exchange earnings while creating close to a million jobs. The country's long term economic development blue print, the Kenya Vision 2030, has identified tourism as the sector that will enable the country achieve a double digit economic growth rate thus propelling the country into a globally competitive and prosperous nation by the year 2030. Despite efforts in marketing the country abroad through the Tourism board, the sector remains highly susceptible to perceived or actual risks associated with travel. For the sector to play its rightful role in contributing to growth, the factors that affect it ought to be empirically investigated so that those with negative effects can be addressed for the sector to achieve its envisaged target. The purpose of this study therefore was to empirically investigate how various factors influence international tourism demand in Kenya. The study estimated the demand for Kenya's tourism from UK, America and Indian tourists using the double-log linear model through Generalized Least Squares estimation technique. Panel data for the period 1980- 2012 was used for the analysis
Total debt servicing and macroeconomic performance in Kenya
(2015-04) Otieno, Joshua Magero; Njuguna, Angelica; Njaramba, Jeniffer
Kenya seeks to meet the Millennium Development Goals, under the guidance of The Kenya Vision 2030. The leading challenge to this course remains the soaring debt servicing obligations, capturing a significant portion of the national budget. Kenya has been borrowing externally at higher rates and continually expanding the debt ceiling. The government will therefore in future spend a significant portion of its revenue repaying the debts at the cost of important local investment. The government is therefore limited to fully fund critical sectors of the economy that will spur sustainable growth and increased investment opportunities; key to widening the tax base. This has an overall implication on the country‟s revenue, income, employment and poverty level. This study aimed at determining the long-run relationship between total debt service and selected macroeconomic variables and to analyze the dynamic response of the variables following innovations in total debt service. Long run equations expressing the relationship between total debt service and real Gross Domestic Product, Real effective Exchange Rate and private investment were estimated. The results showed evidence of crowding out effect but no existence of debt overhang. Kenya was also found to have weak policy institutions thus remained vulnerable to adverse global exogenous shocks. In analyzing the dynamic impact of innovations in debt servicing on selected macroeconomic variables, a Vector Autoregressive (VAR) model was estimated with subsequent derivation of the Impulse Response Functions (IRF) and Variance Decompositions that explained the dynamics of the model. Based on the results, the impact of an unexpected shock in total debt service in the economy lasts for more than ten years to fully decay. The study tested time series behaviours like presence of unit root and serial correlation in the data to guard against spurious results. A string of diagnostic tests were also undertaken to establish the predictive power of the models. The Akaike Information Criterion (AIC) was used to determine the optimal lag length of the variables included in the VAR model.
Analysis of private domestic investment in Kenya.
(Kenyatta University, 2015-05) Okotti, Samuel Matendechere
Private domestic investment is one of the major contributors to economic growth and development in both developed and developing countries. In Kenya the ratio of private domestic investment to GDP has substantial fluctuations. These fluctuations in investment ratio and levels pose a challenge in formulating policies that lead to attaining the desired level of private domestic investment. The Government has been implementing different strategies to boost private domestic investment but it is not clear to which extent each strategy has affected private domestic investment. Policy uncertainty proxied by political instability also undermines private domestic investment in Kenya. This project aimed at studying the determinants of private domestic investment in Kenya from 1970 to 2012 capturing the political instability such as electioneering periods, different economic policies (i.e. the import substitution policy and the export promotion policies), and their impact on the growth of private domestic investment. The effects of elections were captured using a dummy variable for the election years and one year before and after elections. The accelerator model was modified to capture various factors relevant to Kenya in determining the level of the growth of private domestic investment. The test for a unit root was done on the time series data using the conventional unit root tests known as Augmented Dickey Fuller [ADF] unit root test procedure. The unit root test reveals that broad money supply, public investment and previous domestic investment variables under investigation are 1(1) while growth in private investment, real interest, growth in GDP and growth in domestic saving are 1(0). The results further indicate that in the long run the growth in GDP, previous growth in GDP, growth in domestic investment, and election were significant determinants of growth of the private domestic investment. Whilst real rate of interest, broad money supply, growth in public investment, previous period growth in domestic investment and dummy variable of were not significant determinants of growth of private domestic investment
Technical efficiency analysis of public road transport providers in Nairobi-Kenya
(2015-05) Githinji, Andrew K.; Ngui, Dianah M.; Nyambura, Aflonia
Measurement of efficiency levels of transport helps in identifying opportunities that enhance the public transport performance. This will facilitate effective and efficient management of fleets that provide public road transport and planning for interventions incase the sector needs improvement. Public transport sector is a key social facility that aims at improving the welfare of regions inhabitants. Across developing countries provision of efficient, fair and impartial road transport in urban areas with an ever increasing population, increasing transport demand and limited resources is a challenge. It is therefore of great need to evaluate the current efficiency levels of transport providers in Nairobi. Despite the massive reforms in the Kenya public transport by road there is still evidence of higher number of people in Nairobi opting to use other means of transport with walking being dominant. This study sought to measure the technical efficiency of public transport in Nairobi and compare their levels of efficiency in order to give a practical guideline on potential efficiency improvements. The study used stratified sampling in data collection from the operators that offer public transport by road in Nairobi. Stochastic frontier analysis was used to estimate efficiency levels. To achieve these objectives the study used data from 44 public transport SACCOs that had met the set requirements of NTSA during the study period. The results revealed that, there was a huge difference of technical efficiency that ranged from 98.32% for the most technically efficient firm to 27.86% for the least efficient firm. Analysis of SACCOs with respect to the vehicles they operate revealed that high carriage vehicle were more technically efficient with a mean of 68.27%. Firms that operated fourteen seater vehicle were the least efficient with a mean of 54.53%. The study therefore concluded that there exists diverse technical efficiency challenges in transport provision that continually pose threats to the achievement of efficient transport system. The study recommends the use of high sitting capacity buses because they are more efficient compared to low sitting capacity vehicles.

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