MST-Department of Applied Economics

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Analysis of import demand elasticities for Kenya: 1970 to 2013
(2015-01-28) Kamau, Penina Waithira; Wawire, Nelson; Makori, Steve
There was continued increase in imports volume and shrinking of exports. Due to government preoccupation with mobilizing external financial assistance, debt increased tremendously. The problem of growing population in Kenya, heavy importing and borrowing has led to current account deficit. Information on import demand elasticities was key to informing the tax policies that were to guide the taxation of imports and deciding optimal imports. The specific objective of the study were to estimate price elasticity of demand for imports, income elasticity of demand for imports and foreign exchange reserve elasticity of demand for imports The study analyzed the import demand elasticities using time series data from 1970 to 2013. Secondary data was used in the study. Data was collected from Central Bank of Kenya and Kenya National Bureau of Statistics documents. A multiplicative import demand function was estimated from which import elasticities were determined. The results show that income, relative price and foreign exchange reserve affect imports value. Long run elasticities were estimated and the coefficients of the variables were statistically significant expect for relative price. All the long run elasticities were found to be inelastic. Value of imports, relative price, income and foreign exchange reserve were co integrated in long run. The Kenya Revenue Authority can increase revenue collection from import duties. This was because import income elasticity for Kenya in long run was inelastic implying that imports responds to income is less than proportional. Export promotion policies should be encouraged as they increase foreign exchange reserves. This is because the results show that import demand respond to foreign exchange reserve. Borrowing efforts should be discouraged given that foreign exchange reserves elasticity was inelastic. This would improve balance of payments due to reduction in debts. Government can utilize imports of the previous period to forecast levels of tax revenue and also determine import behavior. This was because the lagged value of imports highly influences the demand of imports in Kenya. Key words: Import demand elasticities, GDP
An analysis of Kenya's trade experience with regional cooperation and integration under comesa
(2012-10-19) Muniu, Dedan Mugo
Regional Cooperation and Integration is highly regarded by many countries in the world, both the developed and developing countries. However, much as many leaders in the world enthusiastically embrace the idea of regional cooperation, some studies have shown that there are countries that do not benefit from the arrangements put in place especially at the beginning of these regional blocks. Other studies show that economies that adopt complete trade liberalization develop faster than those that join a regional trade body. In view of these arguments there arises a need to evaluate the position of Kenya in the country's adoption of trade liberalization policies in general and their application to the Common Market for East and Southern Africa (COMESA). To undertake this study, data are obtained from International Financial Statistics, Statistical Abstracts and other publications. Tests were carried out on the data, and estimation of the relationship between variables was done using Generalized Least Square method. Since some variables were correlated, estimation was repeatedly done leading to the dropping of some variables, and choosing of the best model. The results show that Kenya's participation in regional trade arrangements, in particular reference to COMESA, results in growth in trade. The government should therefore promote and strengthen trade arrangements with COMESA countries in order to reap more benefits that would result into further growth in trade between Kenya and other members of COMESA. Further, the government should lead the manufacturing and services sectors into investing in research focused on identifying other trade opportunities that have to be taken advantage of
An analysis of the determinants of rural household savings in Bondo district
(2012-10-17) Oriaro, Hellen Adhiambo
This paper investigates the determinants of rural household savings in Bondo district, Kenya. The endogenous variables examined in this study include: age, bank distance, dependency, education level, employment status, income, interest rate, wealth and urbanization. The urbanization variable was later dropped as it gave conflicting results. A total of 120 househol heads were interviewed and both qualitative and quantitative results were obtained. The main empirical findings of the paper are:- i) The most significant factor determining household savings is income. The other variables that were found to be significant are wealth, interest rate, employment status and education level. ii) Dependency was found to have a positive coefficient in Rarieda division. Thus, high dependency was found to reduce savings only in urban areas but in the rural areas, a positive relationship was found to exist between savings and dependency. iii) Education motive was found to be the most important motivation for household savings in Bondo district. iv) Businesslike occupations contributed more to rural household savings than wage employment. v) Contrary to expectations, bank distance was found to have a positive coefficient, implying that the long distances to the saving institutions encouraged savings in the rural areas. vi) Wealth may not encourage savings in rural areas. Based on these findings, it was suggested that rural househols savings could be increased through:- i) Promotion of non-wage occupations in rural areas ii) Encouraging the wage earners to engage in businesses that would boost their income levels. iii) Implementation of savings policies at lower levels such as the divisional and locational level. iv) Promotion of public awareness programmes by financial institutions. This would lead to increased awareness by the rural folk on the advantages of financial savings.
Analysis of the Relationship between Expenditure on Oil Imports and Public Spending on Selected Social Services in Kenya
(Kenyatta University, 2019-07) Imbogo, Zakayo Goddard N.
Since independence, oil imports in Kenya have been rising mainly to sustain the nascent transport, manufacturing, energy, agriculture and maritime sectors among other uses in the country. The growth in the country’s oil import bill has however been closely related to public spending in the health and education sectors which experienced shocks owing to the growth in expenditures apportioned to the rising volume of oil imports. Given the significance of the social pillar of the Kenya Vision 2030 and the inconsistency in the progress towards achieving the Sustainable Development Goals, which is inherent in the Kenya Vision 2030, understanding the linkages between the aforementioned trends in expenditures can help in explaining the progress towards attaining the education and health facets of the social pillar. The purpose of this study was to analyze the relationship between aggregate expenditure on oil imports and government expenditures on health and education. The specific objectives of this study were to: estimate the relationship between the aggregate expenditure on oil imports and government expenditure on health; and estimate the relationship between the aggregate expenditure on oil imports and government expenditure on education. The data used was annual aggregate expenditure on oil imports; government expenditure on health; government expenditure on education; exchange rate; and oil prices. The data was sourced from Kenya National Bureau of Statistics, Central Bank of Kenya and World Bank. The study employed granger causality and correlation analysis on the annual time series secondary data spanning 55 years from the year 1963 to 2017. The findings of the study revealed that there exists bi-directional causality between government expenditure on health and aggregate expenditure on oil imports on one hand; and a unidirectional causality running from government spending on education to aggregate expenditure on oil imports on the other hand. They are therefore not independent of each other. The findings were based on standard Chi-square tests and F-tests and revealed that there were causal relationships between the pairs of expenditure variables both in the long-run and short-run. The increase in government expenditure on health and education is however a measure to cushion the society from any education and health related adverse effect following an increase in expenditures on oil imports. On the other hand, education and health sectors are key in the upward surge of oil import demand which in turn increases expenditures on oil imports in the country. The increase in government spending on health and education is also attributed to oil price shocks and exchange rate variations in a situation that can not only lead to inflation but also the prices of imports in the country. The general increase in the prices of goods and services in the country forces the government to increase spending in the health and education sectors to prevent a social crisis. While the rise in the volume of imported oil seems indispensable, the government needs to focus on the increase in the prices of imports that is triggered by exchange rate fluctuations as well as the inflation that is triggered by global oil price shocks.
An analysis of the relevance of the monetary approach to Kenya's balance of payments (1969-2002)
(2012-10-17) Waweru, G. M.; Njuguna, A. E.; Obere, Almadi
Balance of payments deficits have been a common phenomenon in the Kenyan Economy from the 1960s. The government has over the years enacted various policy measures aimed at remedying the situation, however the balance of payments situation does not seem to have improved despite these policy measures. This study examines the relevance of the monetary approach to the balance of payments in Kenya using annual data covering the period 1969 to 2002. The monetary approach is one of five approaches to the balance of payments. The others are the Keynesian, elasticity, absorption and the portfolio balance approaches. According to the monetary approach, the balance of payments is essentially a monetary phenomenon. To carry out the study data, from the International Financial Statistics yearbooks and the May 2003 CDROM is used. The data is tested for unit root tests and co integration, among the variables established and thus a vector error correction (VEC) model is estimated. The results of the VEC estimation indicate that BOP is significantly affected by its own second and third lags, the first and second lags of exchange rate and the first lag of prices. Granger causality tests show no causality between balance of payments and the other five variables. However impulse response analysis indicates five years as the period within which balance of payments responds to innovations. Domestic credit and interest rate are the two important variables affecting Kenya's balance of payments. Exchange rate and prices are also significant. The study finds the monetary approach relevant in managing Kenya's balance of payments.
Budget Deficit Financing and Exchange Rate Volatility in Kenya
(2014-03-10) Kirui, Benard Kipyegon; Kimani, Tom Mburu; Wawire, N. H. W.
This study was motivated by over a quarter of a century of exchange rate volatility, the persistent problem of budget deficit in Kenya, and the importance of the two in the economy, which explains their inclusions in the convergence criteria for the East Africa Community. Exchange rate volatility exposes the participants of international markets to the risk of loss and thus disturbs the optimal allocation of resources. Despite effort made by past studies to explain exchange rate volatility, there exists controversy in their findings, with a counterargument being provided for each assertion. This study attempted to improve on the modelling of volatility in exchange rate in order to best explain its movement. This was done by analysing the effects of using the financing composition of budget deficit instead of budget deficit in modelling of exchange rate volatility. Thereafter, the model that provided the best fit and forecast were applied to determine the effects of budget deficit financing and macroeconomic fundamentals on exchange rate volatility under different exchange rate regimes. Monthly data spanning the period 1973:01 to 2005:12 for the following variables: exchange rate volatility, interest rate differential, inflation rate differential, domestic nominal interest rate, money supply differential, net foreign assets and productivity differential were used to achieve these objectives. The study tested for structural breaks and aggregation of variables problem then applied the VAR estimation technique to the model which offered the best fit. VAR results were used to explain the effects of macroeconomic fundamentals on exchange rate volatility. The results of impulse response functions and variance decomposition revealed that shocks to productivity differential, inflation rate differential, and to a lesser extent, the interest rate differential and the net foreign asset are the main drivers of exchange rate volatility in Kenya. The analysis of the results revealed a stronger medium- to long-term causality linkage from macroeconomic volatility to exchange rate volatility than the other way around. This was evidenced by bidirectional causalities between productivity differential, inflation rate differential, and to a lesser extent, the interest rate differential on one hand and exchange rate volatility on the other. The net domestic financing of budget deficit had positive effect, while the net foreign financing of budget deficit had negative effect. The study concluded that there is no aggregation problem in budget deficit. However, the model with the financing composition of budget deficit provided the best fit and the macroeconomic fundamentals successfully explained exchange rate volatility.
A case study of marketing systems for beans in Machakos district
(2012-05-18) Katheka, John
Agriculture remains the mainstay of the economy of Kenya. It not only tops the list of foreign exchange earnings for the country but is also the source of livelihood in terms of food production in the country. Beans are second only to maize as a source of food in Kenya. This study, which consists of six chapters, looks at the marketing systems for beans in Machakos district of the Eastern province of Kenya. Eastern province is the major bean producer in Kenya and Machakos is one of the leading districts in the production of beans in the Province (see Appendix III). Mostly small-scale farmers grow the crop by intercropping it with other crops, for example maize. The district lies between high and low potential zones. The high and medium potential areas are the surplus bean areas while the low potential areas are the deficit bean areas. The research problem addressed to by this study is mainly the lack of information on bean production and marketing in Machakos district in particular and Kenya in general. The specific objective of this study is to describe the marketing systems for beans in Machakos District and to identify the factors affecting the marketing efficiency. Both primary and secondary data are used. The primary data was collected through questionnaires and is used for empirical results in Chapter five. The secondary data is incorporated in chapter one. Descriptive and frequency tables and multiple regression results analyses are presented in Chapter five, which discusses the results. Chapter six gives the summary and conclusions of the study findings. The chapter also suggests some policy recommendations, which could be implemented to improve the production, consumption and marketing of beans in Machakos district in particular and Kenya in general.
Characteristics and the impact of rotating savings and credit associations on the growth of micro and small enterprises in Nairobi-Kenya
(2011-12-29) Mbwiria, Esther Kathure
Micro and Small Enterprises (MSEs) promotion in Kenya is a viable and dynamic strategy for achieving National goals such as poverty alleviation. In recent years the sector has gained widespread recognition. However, the sector has continually faced several constraints to growth and development. One of them being financial due to limited access to credit facilities. A number of informal micro-finance institutions have come to the rescue of MSEs in access to credit. One such institution is Rotating Savings and Credit Associations (ROSCAs). ROSCA is an indigenous organization of a group of people who make regular contributions to a fund, which in turn is given in whole or in part to each contributor in rotation. The purpose of this study was to examine the impact of ROSCAs on the growth of Micro and Small Enterprise in Nairobi. Though the number of ROSCAs is generally on the increase among citizens, little research has been done on their impact on the growth of MSEs. The study is important because the findings will provoke interest and encourage the various stakeholders to provide an enabling environment for the growth of the sector. The study is descriptive survey that sought to evaluate the impact of this type of credit to growth of MSEs. It was conducted in Nairobi and selection of the sample, involved a combination of techniques, viz. cluster, stratified random sampling, simple random, and snowballing. A sample size of 130 MSEs and seven, ROSCA groups were selected. Data was collected through personal interviews incase of individual enterprise owner-manager, and direct administration in case of ROSCA groups leaders. In addition to ROSCA - member enterprises interviewed, 49 nonmember enterprises were also interviewed to establish reasons why they have not joined or formed ROSCAs. Both qualitative and quantitative data were collected. Descriptive statistics, with in-depth content analysis, were summarized under common themes and presented in form of tables, frequencies and percentages. The findings indicated that ROSCA credit was mainly used in the following areas: buying stock (82% of the respondents), buying assets (62%) and domestic activities (58%). As a result of credit intervention, respondents reported improvement in income, with a positive change ranging from 8% to 500% increase with an average of 115.3% Other changes included savings (82.3%), sales (57.7%), assets/stock vi (54.6%), market skills (52.3%) and employing more workers (46.2%).Management practices and working capital also improved. The enterprises registered a minimal horizontal expansion through opening of new enterprises and business diversification. Only 11.5% of the respondents reported opening new branches on acquiring loans from ROSCA groups. However, no enterprise reported vertical growth, i.e, none changed from micro to small, or small to medium. Other changes reported included improvements in entrepreneurial skills, networking, and family welfare, among others. Nevertheless the enterprises reported a number of constraints, which may have contributed to minimal growth in the enterprises. These included limited amount of working capital, lack of suitable premises, economic uncertainties, lack of adequate equipments for manufacturing enterprises, and socio- political factors, among others. The main reasons given as to why some enterprise owners did not join or form ROSCAs include conflicts, gossips, small loans and negative attitudes. Some respondents, especially men, said that ROSCA micro-finance is highly for women. In conclusion, the ROSCA micro-finance system / network were found to be effective in assisting the Micro and Small Enterprise to progress and reach some measure of growth. It is therefore recommended that ROSCA groups should be supported and strategically used to promote self-reliance and to help the economic viability among the individuals who source this type of credit. Aggressive dissemination of information regarding ROSCAs as a source of credit should be done in order to promote this type of microfinance.
The characteristics of the poor people in rural Kenya. a case study of Kisii central district
(2012-04-17) Sevelius, Barongo Yophen
All countries worldwide view poverty as an enemy to development. This is why governments' efforts are directed towards the alleviation of poverty. In Kenya, poverty has been and still is one of the main problems facing the country and particularly in rural areas. To achieve any sustainable economic growth and development in Kenya, is important to alleviate poverty in rural areas , but first by understanding the major causes of poverty in rural areas even in areas with agricultural potential like Kisii Central District. The purpose of this study was to investigate the characteristics of the poor people in rural Kenya. The setting of the study was Kisii Central District. The respondents consisted of 64 rural households. Data were collected through the questionnaires and interviews. Out of the total 64 households, 37 were classified as poor and 27 were classified as rich by using food consumption expenditure to total income ration method. The study sought to find out the characteristics of the poor in rich agricultural Kisii Central District. Descriptive statistics were employed in the analysis of the collected data. The results revealed that large family sizes, lack of enough land, high illiteracy level, lack of access to rural credit facilities, theft of the farm produce, and diseases especially malaria were some of the characteristics of the poor in Kisii Central District. The policy recommendations suggested by the researcher included: the government and NGOs to promote literacy level in rural areas, provision of rural credit facilities to the farmers, reduction of large family sizes through the spread of education on the importance of having small family sizes, spread of education on how to control malaria and punishing heavily all those caught stealing farm produce.
Community Participation and Outcomes of Selected Community Based Development Water Projects in the Informal Settlements of Nairobi City County, Kenya
(Kenyatta University, 2020) Wasilwa, Caleb Wafula
A great proportion of the population living in urban areas of Kenya especially in Nairobi City County reside within the informal settlements. These informal settlements are prone to water related challenges such as failure to access piped and safe water. It is this situation that has continued to attract attention of governmental and non-governmental organizations which have kept on supporting water related projects to solve such menace. Available information revealed that over 50 percent of the water projects within the informal settlements are non-operational. This is what motivated the study. This study sought to assess how various factors affect community participation in community based development water projects in the informal settlements of Nairobi City County and how such participation impact on the project outcome. The study was guided by two specific objectives which were to investigate the determinants of community participation in community based development water projects in Nairobi County and to determine the effect of community participation on project outcome in community based development water projects in Nairobi County. Primary cross-sectional data used in this study was collected using questionnaires administered to 48 respondents selected from three slum areas of Nairobi County which are Kibra, Mathare and Korogocho. Three water projects, one from each slum were randomly selected. The logistic regression estimation for achieving the first objective was conducted using five different levels of participation as dependent variable. The results showed a negative effect of sex on participation in project identification; sharing of ideas; deciding on location of the project and monitoring but positive on labor provision. Age influences all the five participation levels negatively except labor provision and monitoring. The effect of marital status is only positive on labor provision but negative to the rest while education has negative effect only on identification of water project as a need. The number of children has negative effect on participation at all levels. Moreover, the effect of employment is negative on labor provision but positive on all other participation levels. In regard to the second objective, it was noted that training as well as factoring in all ideas of members in decision making is very influential in ensuring that water projects meet the needs of the community. Furthermore, the higher the quality of the staff used to implement and manage the projects, the higher the likelihood of the water projects meeting the needs of the community.
Constraints to small holder credit farm investment: a case study of coffee farming in Majoge Chache location, Kisii district
(2012-05-07) Ombuki, C.
This study analyses the constraints to smallholder credit farm investment. The data for the study were collected in Majoge Chache Location, Kisii District. A total of 40 respondents were interviewed for a period extending from 17th of July to the 5th of August 1995. A list of farmers in Majoge Chache Location who had borrowed funds for investment in coffee farms was obtained from the Loans Officer based at Ogembo Divisional Headquarters. Following the list, systematic sampling procedure was then applied in which every sixth loan farmer was picked until a sample size of 40 was obtained. The estimated results of both semi-log and double log models indicate that initial household endowment of housing services and investment in non-farm activities have very significant effects on credit farm investment. Specifically, sample farmers with quality houses were observed to invest more of the credit they received on the farm. The main non-farm activity to which most of the sample farmers diverted farm credit was school fees. The results indicated that other variables studied do not have significant effects on the proportion of credit invested in coffee farms in the study area. These variables are: Family size, number of children in school, price of coffee per kg., and household income.
Credit risk, efficiency and performance of commercial banks in Kenya
(Kenyatta University, 2014-10-10) Lakasia, Japheth Manguya; Muniu, Joseph Muchai; Gachanja, Paul Mwangi
Banking in Kenya is very dynamic and robust. Performance of this sector measured by profitability is very important and should be monitored closely because it contributes immensely to economic growth in Kenya. Vision 2030 of Kenya envisages an increase of savings to 10% of GDP. The government of Kenya is relying on commercial banks to mobilize the savings that will . lead to extension of loans to the public to fuel development. Credit creation is the main income generating activity of banks; however banking comes with a couple of risks including credit risk captured by the level of nonperformingloans among other factors. Recently the level of nonperforming loans in the Kenyan banking industry has been on the upward trend. There is a felt . need to ad~ress this trend because an increase in nonperformingloans (indicator of credit risk)• may hamper commercial banks from achieving their objectives. Therefore this study seeks to . establish the effects of efficiency and credit risk on performance of commercial banks. This ..researchis significant in the sense that it will help banks to place themselves strategically towards achievement of their goals. The study will employ Data Envelopment Analysis to determine•• .. techriical efficiency of commercial banks while panel data regression model will used to establish credit risk on performance of commercial banks.
Debt Sustainability and the Optimal Debt in Kenya
(2014-03-10) Nandelenga, Martin Wafula; Oduor, Jacob; Kosimbei, G. K.
Sustainability of debt and optimal debt of a country has become an important issue for adequate macroeconomic management. This paper looks at the debt sustainability and optimal debt of the government of Kenya that can enhance a 10 percent economic growth as projected in Vision 2030. In this regard cointegration testing of the present value budget constraint was the main tool that was used to empirically analyse the sustainability of the historical fiscal process and simulation was used to determine the optimal debt that could enhance achievement of 10 percent gross domestic product (GDP) growth as projected in Vision 2030. The findings suggest that public debt has infact been sustainable and point to the prudent public sector policies by the 'fiscal authorities. On the optimal debt, the findings from the simulation show that a debt to GDP ratio of35.2% is optimal to achieve a 10% economic growth projected in Kenya-Vision 2030.
The demand for prenatal health care services in Nyando district, Kenya: a case study of lower Nyakach division
(2012-04-05) Oremo, Hellen; Oloo, K. O.; Kuuya, P.M.
Women play an important role in the production of goods and services in any economy. For maximum production, they need to be healthy. Maternal and child health is an essential and integral element of health care programme aimed at improving general health status of women since better maternal health helps to reduce the risk of death and disability in pregnancy and child birth. On the other hand, prenatal health care is an essential component of maternal and child heath care. Good prenatal heath care helps to reduce morbidity and mortality on women and children. However, there is low attendance of prenatal health care especially in the rural areas. However, there is low attendance of prenatal heath care especially in the rural areas. It is therefore necessary to understand factors that determine demand for prenatal health care in the rural areas. This study has investigated the determinants of prenatal health care services in Lower Nyakach Divisions of Nyando District. To meet the objectives of the study, primary data was collected and analysed using both econometric and descriptive methods. Econometric analysis involved estimation of a log linear model using Ordinary Least Squares (OLS) estimation technique. The empirical results showed that price of prenatal health care, waiting time, perceived quality, distance traveled and the duration of the pregnancy at which the first prenatal health care visit was made are significant determinants of demand for prenatal health care. Descriptive results showed that contrary to the beliefs that people are moving away from the traditional health care, women in the rural areas are still visiting both modern and traditional health care facilities. The results also showed that demand for prenatal visits late (between five and six months of pregnancy). Based on the empirical findings, the study recommends that health care planners should design and modify the hours of operation of certain facilities to reduce waiting time, since waiting was found to be a significant determinant of demand for prenatal health care; that prenatal health care services should be further subsidized. On the other hand, mobile clinics should be provided to reduce distance travelled to the health care facilities. Distance was found to negatively influence demand for prenatal health care and was also a significant determinant. The study also recommends that awareness campaigns for prenatal health care be intensified and also included in public education programmes and that when planning for health care services, the feelings and opinions of potential users should be taken into consideration. For example, health care providers can adapt some aspects of their services to satisfy the patients’ expectations.
Determinants of aggregate domestic private savings in Kenya, 1980-2003
(2012-01-12) Tiriongo, Samuel Kiplang'at
This paper studied the determinants of aggregate domestic private savings in Kenya capturing the reform period 1980 to 2003.It was motivated by the existence of substantial fluctuations in the ratio of aggregate domestic private savings to GDP and the interest to test the impact of demographics and financial sector development on private savings. The study included demographic variables like young and old age dependency ratios, and the different measures or indicators of financial sector development: the ratio of M2 money to GDP, the ratio of liquid liabilities to GDP and the ratio of the assets of commercial banks to the assets of' central bank as new variables previously not used in any study on Kenya. Among the other variables were income tax, deposit rate used at central bank, current account deficit. The interest rate spread, terms of trade, inflation rate and real gross disposable per capita income. A hybrid model was specified consisting of all the variables identified from the Life Cycle hypothesis on savings and consumption, the permanent income hypothesis and the simple Kevnesian hypothesis was used in the estimations. The results of the estimations showed that aggregate private savings in Kenya is significantly determined by the current account deficit, the ratio of M2 money to GDP, real gross per capita income growth, deposit rate and the old age dependency ratio.
Determinants of capital flight from Kenya
(2014-01-06) Kipyegon, L.
This study investigates the determinants of capital flight from Kenya over the sample period 1971 to 2001. Although evidence available indicates fluctuations in the level of capital flight from Kenyan economy since early 1970s, it is unclear what factors determine capital flight from Kenya. The specific objectives of this study were to identify factors that significantly determine the level of capital flight from Kenya and to draw recommendations based on the study findings. Capital flight model was specified based on the portfolio adjustment theory. Augmented Dickey Fuller stationarity test results revealed that real capital flight was stationary at level ~ hence it was only possible to estimate short run capital flight model. This study emp loyed time series data over the sample period 1971 to 2001, and ordinary least square method was used to estimate the model. Empirical findings based on residual measure to capital flight indicate external borrowing as the most significant determinant of capital flight from Kenya. it also revealed that capital flight tends to persist overtime once it occurs. Furthermore, the results indicated that real exchange rate, real growth rate, inflation rate and a proxy measure of financial development, M2/GDP; are also significant determinants of capital flight from Kenya. Irnportant policy implications drawn from the study findings are that: Kenya government should ensure transparency and accountability with· regard to foreign borrowing and management of borrowed funds. Moreover, it is important to restore public confidence ill the government and sustainability of macroeconomic policies, and to create a stable and favourable investment environment. This in turn, requires a realistic exchange rate, positi ve but moderate real interest rates and robust economic growth.
Determinants of current account balance in Kenya
(2014) Kimani, Samuel Mwangi
Current account is one of the components in the Balance of Payment of a country. It covers all the transactions that involve the real sources (goods, services, income).It comprises the international balances of transactions in trade of goods and services, factor income and current transfers. Current account balance is significant because it is key economic indicator of country’s external performance. Despite this voluminous literature, there is hardly any consensus as regards the determinants of the current account balance in the world Kenya included to facilitate the policy decisions.The overall objective of this research study was to investigate the determinants of the current account balance in Kenya. The specific objectives were be:to identify the factors that determines the current account balance in Kenya, to determine the magnitude of effect of each determinant on current account balance and to identify the policy option toward the favourable current account balance in Kenya. The study covered the 1970 to 2010 period. Vector error correction model (VECM) was employed to determine the factors that affect the current account balances. Empirical model was established and various econometric tests were conducted to reveal the determinants and their strength. Results established that the 16.18% of the current account was caused by economic growth, 17.97% was explained by exchange rate, 19.54% was explained by current account itself, 14.74% by budget deficit, and 15.31% by inflation while13.88% by balance of trade in long run. On the other hand the impact of the, budget deficit and current account balance itself are positive while growth rate investment, balance of trade ,inflation, exchange rate on the current account are negative. Effects of investment and savings on current account exhibited both positive and negative but in small scale under period under review. From results, deliberate export oriented approach through product diversification and value addition to venture in international markets, prudent fiscal measures by the government and stable exchange rate and inflation are some of policy measures that can be employed by the government to stabilize current account
Determinants of current account balance in Kenya
(2015-01-28) Kimani, Samuel Mwangi; Maingi James
Current account is one of the components in the Balance of Payment of a country. It covers all the transactions that involve the real sources (goods, services, income).!t comprises the international balances of transactions in trade of goods and services, factor income and current transfers. Current account balance is significant because it is key economic indicator of country's external performance. Despite this voluminous literature, there is hardly any consensus as regards the determinants of the current account balance in the world Kenya included to facilitate the policy decisions. The overall objective of this research study was to investigate the determinants of the current account balance in Kenya. The specific objectives were be:to identify the factors that determines the current account balance in Kenya, to determine the magnitude of effect of each determinant on current account balance and to identify the policy option toward the favourable current account balance in Kenya. The study covered the 1970 to 2010 period. Vector error correction model (VECM) was employed to determine the factors that affect the current account balances. Empirical model was established and various econometric tests were conducted to reveal the determinants and their strength. Results established that the 16.18% of the current account was caused by economic growth, 17.97% was explained by exchange rate, 19.54% was explained by current account itself, 14.74% by budget deficit, and 15.31% by inflation while 13.88% by balance of trade in long run. On the other hand the impact of the, budget deficit and current account balance itself are positive while growth rate investment, balance of trade ,inflation, exchange rate on the current account are negative. Effects of investment and savings on current account exhibited both positive and negative but in small scale under period under review. From results, deliberate export oriented approach through product diversification and value addition to venture in international markets, prudent fiscal measures by the government and stable exchange rate and inflation are some of policy measures that can be employed by the government to stabilize current account.
Determinants of demand for the choice of mobile telephone service providers in Kiambu District
(2012-10-19) Wainaina, Martin C.; Obere, Almadi; Susan, O.
The major objective of the study was to identify which factors affect demand for the choice of different mobile telephone providers and their tariffs in Kiambu District. Though the demand is noted to on the increase, the price and income among other factors theoretically determine the different choices of tariffs; their influence on demand for the different tariffs has not been theoretically established in Kenya. Hence, the study therefore sets out to highlight some of these factors that lead to choice providers and a tariff regime. To achieve the objectives of the study, cross sectional primary data was collected using questionnaires from a sample of 100 respondents. Both descriptive and regression results were given. For the multinomial econometric analysis of the data, only 90 respondents were used because some of respondents gave incomplete data. Due to the discrete nature of the demand for the choice of various providers and tariff regime, multinomial logit model was adopted to capture the demand for various choices. The descriptive results revealed lack of consistency on ownership of the mobile telephones across the income divide. An important observation in that respondents chose various provider and tariff regimes in reference to whether they had congestion and they were cheap. The regression results showed that price of respective mobile telephone service providers calls and convenience were the most significant determinants. The price was found to be negatively related to the choice of a provider and choice of a tariff regime. The study revealed that mobile telephone and landline telephones are compliments rather than substitutes
The determinants of foreign direct investment in Kenya
(2012-10-17) Muthoga, S. Karagu
Foreign Direct Investment forms one of the most important links between developing and industrial countries and increasingly among developing countries. Like trade, it provides an important channel for global integration and technology transfer. Kenya faces a big challenge in attracting and sustaining foreign direct investment at levels that allow domestic investment to take advantage of benefits associated with capital inflows. The study therefore sought to conduct an empirical investigation on the determinants of foreign direct investment in Kenya. The theoretical framework is based on the concept of institutional FDI fitness theory, developed by Saskia Wilhelms. The study used data over 1967-1999 period, partly because after independence (1963), marked the beginning of the development process. The results were interpreted based on the generalized least square model (GLS). The estimated linear regression model revealed that, economic openness is the most significant determinant of foreign direct investment inflows in Kenya. Other variables that were significant determinant of FDI inflows included growth rate of GDP, credit availability from the monetary authority, domestic investment, the exchange rate and internal rate of return. The rest of the remaining variables in the estimated model were statistically insignificant. These include: external debt; inflation rate; trade balance; university enrolment rate and gross domestic savings. The implication of all these findings is that ensuring the promotion and sustainability of Foreign Direct Investment, as a tool that enhances Kenya's economic growth is a formidable challenge to policy makers now and the years to come.

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