RP-Department of Applied Economics

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The 2008 Global Economic Crisis and Public Expenditure: A Critical Review of the Literature
(Advances in Management & Applied Economics, 2014-04-10) Gatauwa, James M.
The United States of America subprime mortgage market precipitated the occurrence of the 2008 global economic crisis that has made financial disruptions the world over. Therefore there has been the need to evaluate the extent to which this crisis affected economies globally. Hence, the effect of the 2008 global economic crisis on public expenditure was reviewed. The paper concludes that economies whose public expenditures were significantly affected by the crisis were those closely integrated to the US financial markets, those with imprudent macroeconomic measures at the pre-crisis period and those with a high level of export dependence. Also the interrelation between macroeconomic factors and public expenditure as influenced by economic policy indicates that the crisis caused the macroeconomic factors to deteriorate. Hence this led to governments adopting economic policy measures that could curtail the crisis effect on public expenditure.
Aid unpredictability and Economic Growth in Kenya
(African Development Bank Group, 2015) Ojiambo, Elphas; Oduor, Jacob; Mburu, Tom; Wawire, N. H. W.
Studies on the impacts of aid on growth are not limited. Some have found positive effects, others negative effects, others no effect and others have found positive impacts only under certain conditions. A less examined aspect is the role of aid unpredictability on growth. While aid unpredictability may negatively affect growth when it disorientates the recipient country’s consumption and investment planning, it may also boost economic growth if it is triggered by responses to economic shocks. It may also induce strengthening of systems of aid absorption in the recipient country that improves aid effectiveness and economic growth. This paper assesses the heterogeneous impacts of aid on growth in a low income country with different aid unpredictability episodes and finds that increased aid unpredictability weakens economic growth in Kenya. In addition, aid unpredictability is found to improve economic growth in an unstable macroeconomic environment implying that aid unpredictability forces weak governments to be more prudent in managing the limited uncertain resources at their disposal during periods of macro instability. We however find no evidence of different impacts of aid unpredictability during periods of shocks.
Analysis of Budget Imbalance Dynamics in Kenya
(Journal of Economics and Public Finance, 2018-11-24) Oguso, Alex; Mwega, Francis M.; Wawire, Nelson H.; Samanta, Purna
Kenya needs substantial and sustained fiscal consolidation to create fiscal space for financing the government’s election pledges, the Vision 2030 development projects, and sustainable development goals. However, the government has found it hard to sustain its fiscal consolidation attempts. This study investigates the fiscal consolidation constraints that act through the budget imbalance dynamics in Kenya using the Olivera-Tanzi effect approach. The study covers the period 2000-2015 using time series data and employs three Auto-regressive Distributed Lag (ARDL) error correction models in the analysis. The study showed that a rise in the general price levels in the economy, adjustment of minimum wages, rise in perceived levels of corruption in the public sector and the political budget cycles (occurrence of a general election) worsen the budget imbalances (deficits) thus constrain fiscal consolidation efforts in Kenya. The study also demonstrated that budget imbalance dynamics in Kenya could partly be explained by the Olivera-Tanzi proposition. The study recommends measures to reduce the fiscal imbalance gap in Kenya, which include controlling both supply and demand side inflationary pressure and dealing with rent seeking behavior in the public sector
Analysis of Devolved Social Safety Funds on Household Welfare in Kenya
(IPRJB, 2023) Shibairo, Peter Misango; Ngaruko, Deus D. P.; Wawire, Nelson H. Were
Purpose: Social safety funds should effectively and efficiently reach needy households, providing a safety net that enhances their welfare and reduces poverty levels in the community. The Kenya National Safety Net Programme (NSNP) is a government social protection programme established in September 2013 as part of the government’s initiative to improve and enhance social protection and improve the welfare of the poor household particularly at the grass root. This study therefore aimed at analyzing the impact of devolved social safety funds on household welfare in Kenya. Methodology: The study employed a non- experimental pooled cross-sectional research design. Cross-sectional data was collected from selected households using a structured questionnaire. The study targeted a population of 1,128,693 households lifted from the Kenya Integrated Household Budget Survey (2015/2016). Fisher's formula was used in sample selection, where a sample of 384 respondents was selected. A multivariate regression model was used to analyze data. Inferential and descriptive statistics were used to analyze the quantitative and qualitative data acquired in the research. Findings: The findings revealed that devolved Social Safety funds significantly and positively influence household welfare in Kenya. Most beneficiaries under study, particularly the elderly recorded a greater improvement in their welfare. Unique Contribution to Theory, Practice and Policy: Given the findings, it is recommended that the government of Kenya should increase the flow of these funds to target a larger proportion of the rural households. This will positively change the welfare of most vulnerable households, particularly in the rural areas
Analysis of income tax system productivity in Kenya
(Amity Directorate of Management & Allied Areas (ADMAA), 2016) Wawire, Nelson H. W.
The Government of Kenya has over the years undertaken reforms in the income tax system with a view of making it elastic. Despite these efforts, studies have shown that the structure is still inelastic. However, these studies omit key factors that affect income tax revenue productivity such as tax reforms, and the structural and demographic nature of the economy. Because of this omission, the estimated income tax elasticity cannot be relied on for planning purpose and for execution of further income tax reforms. The objectives of the paper is to assess the response of income tax yield to changes in its base, discretion actions by the tax authority and unusual circumstances. The study uses time series data that was obtained from various Kenya Government documents and International Monetary Fund Financial Statistics. Regression analysis is used to estimate income tax revenue elasticity which is a measure of productivity of the tax system. The estimated results show that the income tax system is responsive to its tax base (Gross Domestic Product) in the short run but unresponsive in the long run. The response of income tax with respect to Gross Domestic Product (GDP) is found to be less than that of monetary GDP. This suggests the existence of a black economy in Kenya. Income tax yields also respond with lags to changes in its base in addition to being sensitive to discretionary changes in income tax policy and unusual circumstances. The conclusion is that Kenya’s income tax system is inelastic. The findings point to the need for more income tax reforms within the broad spectrum of the on-going implementation of the Public Finance Management programme.
Analysis of Mobile Financial Services Utilization among Small Scale Businesses in Kiambu County, Kenya
(Archives of Business Review, 2020-11-25) Karanja, Kenneth Kamau; Onono, Perez Ayieko
This study examined the level of utilization of Mobile financial services among small scale businesses in Kiambu County. Primary data was obtained through interview administered questionnaire from 123 small scale businesses in Kiambu County. Using descriptive analysis the study found out that 48.8 percent of the businesses utilized mobile financial services. The mobile financial services utilized by the businesses included mobile money in phone, Pay bill Buy goods and services and mobile money bank accounts. Majority of the businesses used mobile money in phone. Businesses cited lack of mobile financial services devices by businesses, lack of mobile financial services incentives such as loyalty points, mobile money transaction charges, poor interoperability between networks, low acquaintance to mobile financial services transactions, service system breakdown, difficulties while accessing customer care services as major challenges in use of mobile financial services. The study concludes that mobile financial services are compliments other financial services in extending financial services to the unbanked sector in the county and recommends that systems development and improvement of service delivery by mobile network operators towards small scale businesses and enhanced legislations on data protection and cyber-crimes to protect users of mobile financial services towards increased use of the services.
Analysis of Price Volatility and Implications for Price Stabilization Policies in Mozambique
(International Knowledge Sharing Platform, 2014) Ngare, Lucy; Simtowe, Franklin; Massingue, Jaquelino
High food price instability is one of the major risks facing agricultural households from developing countries. Resulting from agronomic factors as well as the historically low levels of world grain stocks and climate change, increased food price volatility has attracted renewed interest among policy experts in identifying appropriate policy instruments to counter its effects. This paper applies the GARCH model to data from twelve maize markets in Mozambique to estimate price seasonality and volatility. The results reveal the presence of seasonality, and high volatility. There is scope for improving price stability through the use of both market and non-market based price stabilization interventions that encourage investments in market infrastructure such as roads, warehouses and a market information system; institutions such as warehouse receipt system, credit and insurance; maintaining a strategic reserve and reduced tariffs and food-for-work programmes.
The Analysis of Profitability of Kenya`s Top Six Commercial Banks: Internal Factor Analysis
(2014) Onuonga, S.M.
The financial sector plays an important role in the development of the country. For sustainable economic growth, a country must have a strong banking sector. The Kenyan banking sector has experienced several challenges over time. The government has implemented several reforms to enhance growth and competition in this sector. To achieve financial stability and growth, it is important to identify the determinants of performance of the financial sector. This paper aimed at investigating the impact of the internal determinants of profitability of Kenya`s top six commercial banks over the period 2008-2013, This paper used generalized least squares method to estimate the impact of bank assets, capital, loans, deposits and assets quality on banks profitability. This paper used return on assets (ROA) as a measure of profitability. The findings revealed that bank size, capital strength, ownership, operations expenses, diversification do significantly influence profitability of the top six commercial banks. The result suggests that the Kenyan Government should set policies that encourage commercial banks to raise their assets and capital base as this will enhance the performance of the sector. Another implication of the study is that commercial banks need to invest in technologies and management skills which minimize costs of operations as this will impact positively on their growth and survival
An Analysis of the Factors Affecting Employee Relations in the Flower Industry in Kenya, a Case of Waridi Ltd, Athi River
(Center for Promoting Ideas, USA, 2014-10) Odhong’, Emily Atieno; Omolo, Jacob
Despite impressive performance and contribution to national economy, the flower industry in Kenya is still faced with decent work deficits. These could be manifested in the terms and conditions of employment leading to industrial unrest in organizations within the flower industry. Trade Union membership has been shown to be low, with membership in the main union at just 17% of the total number of workers in flower farms. The effect of weak employee and industrial relations system and practice is manifested in the increase in the spate of industrial strikes and attendant man-days lost. The number of man-days lost due to industrial strikes almost doubled from 14,806 man-days in 2008 to 25,504 man-days in 2010. This, however, increased tremendously by about sevenfold to 175,329 in 2011. Other effects are seen in declining labour productivity in all sectors of the country’s economy, increasing unit labour cost and low levels of competitiveness. Kenya’s labour productivity growth has, for example, declined from 4 per cent in 2007 to 1.4 per cent in 2012. This paper sought to analyze factors affecting employee relations in organizations in Kenya, the case study of Waridi Ltd. Study variables included working conditions, communication, collective bargaining issues, recruitment and remuneration. The study adopted descriptive research design and a target population of 420. Stratified random sampling was done. Questionnaires were used to collect primary data. Qualitative and quantitative techniques of data analysis were employed. Based on the study findings, it is concluded that free communication and information flow is important in promoting employee relations. Collective bargaining provides the structure for clear job description and work performance. Overall, employee relation concepts such as employee trust, the manner in which employee complaints are dealt with, commitment to the organization, genuine social dialogue and existence of team spirit are fundamental in promoting good employee relations.
Analysis of Value Added Tax Productivity in Kenya
(Journal of Economics and Public Finance, 2020-09-28) Muguchu, Jane; Wawire, Nelson H.; Wambugu, Anthony
One of the critical components of Sustainable Development Goals is to strengthen domestic resource mobilization. The target is to have domestic resources contributing at least 75 percent to 90 percent of the financing required to achieve Agenda 2063 (AU, 2015). In an effort to enhance domestic resource mobilization in Kenya, great emphasis has been placed on Value Added Tax whereby the tax authority endeavors to enhance the contribution of VAT collections to GDP from a mean of 6 per cent to 9 percent of GDP. The study sought to estimate the productivity of VAT over the period 1973-2016 using data collected from Kenya National Bureau of Statistics and Kenya Revenue Authority’s database. OLS method was adopted to estimate buoyancy of VAT while divisia index approach was adopted to estimate elasticity of VAT. The study found that, the VAT system was buoyant with a value greater than one while the elasticity was 0.79 which was less than one implying VAT system was inelastic. The study concluded that the tax reforms adopted during the study period had impacted positively on VAT performance hence the buoyancy value greater than one. Therefore, to mobilize more revenue from VAT, reforms focusing on enhancing VAT compliance and expanding tax base should be emphasised.
Antecedents of Talent Retention and Organization Performance of Nairobi City County Government, Kenya
(strategic Journals, 2022) Wainaina, R. W; H, Bula; P, Wambua P
This study established the effect of talent retention on organizational performance of Nairobi City County Government. The study was majorly anchored on the resource-based view theory that holds that organizational performance and competitive advantage results due to superior capabilities and resources compared to those of competitors. Social exchange theory also anchored this study. This research study adopted a descriptive approach through a cross-sectional research design. Purposive sampling was employed in selecting Nairobi City County Government where a census of only the top and middle level managers of Nairobi city county government were selected for the study as they were deemed appropriate to take part in the study. 121 managers within the county government formed the study’s target population. They included the chief officers, directors, deputy directors and assistant directors only. Collection of primary data was done through questionnaire which was pilot tested at the county government of Wajir. The instrument was found suitable to collect the required data for the study. Descriptive statistics like percentages, means and standard deviation were used to analyze quantitative data. A multiple regression model was used to assess the influence of the dependent variable on the dependent variable. Hypothesis testing was done where the criteria of making decision was the p-value of respective beta coefficients at 95% confidence level. The null hypothesis was rejected when p< 0.05. Results from the analysis were presented by the use of figures and tables. The study results found out that talent retention positively and significantly affect organizational performance of Nairobi City County Government. The study recommended that organizational management should apply appropriate strategies to retain the right talents for Nairobi City County Government
Assessing the Stability of Money Multipliers: Evidence from Kenya
(2018-07-02) Onuonga, Susan Moraa
This paper investigated the stability of money multiplier using Kenyan data for the period 1983- 2015.This paper used Maki(2012) tests for cointegration allowing for unknown number of structural breaks and the Dynamic Ordinary Square method to estimate long run parameters. The findings of this paper shows that in the short run money supply function is unstable , however in the long run money supply function is stable. Another finding of this paper is that there is a one to one positive relationship between money supply and high powered money in Kenya. The implication is that money supply is an effective monetary policy target variable, hence can be used by Central Bank of Kenya in implementing its monetary policy in order to achieve the macroeconomic goals.
Bank competition in Kenya
(Springer Nature, 2018-05) Mdoe, Idi Jackson; Omolo, Jacob O.; Wawire, Nelson H.
Abstract This study investigates the level of competition among commercial banks in Kenya over the period 2001 to 2014. The study used a balanced panel data set from 36 commercial banks, the performance dynamics approach and the generalized method of moments to estimate the resulting dynamic panel models. The investigation established that the level of competition among commercial banks in Kenya is low and characterized by 93.9 per percent persistence in profitability. Arising from the study findings, it is important that the government intervenes to rectify the intermediation inefficiency occasioned by ineffectiveness of competition. It is also important that small sized banks in the sector voluntarily merge with other smaller banks in order to exert substantial competition to the large and medium sized banks.
Bank Competitive Landscape and Competition in the Banking Sector in Kenya
(African Review of Economics and Finance, 2019) Omolo, Jacob; Mdoe, Jackson; Wawire, Nelson
This study investigates the evolution of competition among commercial banks in Kenya with changes in the bank competitive landscape. Employing system GMM and the performance dynamics approach, the study establishes that bank consolidation has an inverted U effect on competition in the banking sector in Kenya, growth in technology spurs competition among commercial banks in the short run but is impotent in the long run and the progressive increase in the core capital requirement for commercial banks from KES250 million in 2008 to KES1 billion in 2012 slowed competition in Kenya’s banking sector by 3.3 percentage points. Arising from the findings the study concludes that consolidation of commercial banks is a short to medium term instrument for promoting competition in the banking sector in Kenya, growth in technology is effective in promoting competition in Kenya’s banking sector in the short run rather than in the long run and blind increases in the core capital requirements can lead to undesired outcome of reduced competition in the banking sector in Kenya.
Causes of congestion in the justice system. Does macroeconomic environment matter?
(International Knowledge Sharing Platform, 2018) Marang’a, Moses; Kosimbei, George; Ouma, Duncan
Public services rendered by the justice system institutions are susceptible to congestion which arise from partial rivalry in consumption of these services. This paper investigated the causes of congestion in Kenyan justice system laying emphasis on select macroeconomic variables. A structural model was estimated using instrumental variable method, that entailed the use of data for the period 1960-2016. The findings were that increase in funding to justice system institutions, economic growth and enhanced resolution of cases reduces congestion.We recommend that the Government efforts to reduce congestion should cut across the demand and supply side of the justice market, and on environmental factors that affect the proper functioning of the justice sector. This should involve setting time limits, preferably through legislations, on the maximum period different types of cases should take to be finalized. Such a legislation could also specify the timelines that other players in the justice sector should take to finalize their legal tasks in relation to dispute resolution process. Further, allocation of optimal fiscal resources to justice system institutions would be crucial in financing congestion reduction programmes especially on uptake of technology and upgrading of capital infrastructure.
Community-Based Conservation, Income Governance, and Poverty Alleviation in Tanzania: The Case of Serengeti Ecosystem
(SAGE, 2013) Wawire, N. H. W.; Mwakaje, Agnes G.; Manyasa, E.O.; Muchai, Muchane; Ongare, David; Mugoya, Charles; Masiga, Clet Wandui; Nikundiwe, Alfeo
Protected areas occupy about 27% of Tanzania’s land of 945,000 sq km and contribute 17.5% of its GDP. But who benefits from and pays for the cost of conservation? This study provides insights into these issues based on a survey conducted in the Serengeti ecosystem, involving 20 villages in Serengeti and Loliondo. The results show that villagers received insignificant benefits from conservation compared with the costs they are incurring. Governance of income at the village level was also a major challenge. There was a lack of capacity to handle large amounts of money and little or no planning, transparency, and accountability. It is recommended that income allocation to the communities is increased and external audits of village funds are conducted. Communities should furthermore be allowed to extract resources sustainably in protected areas. Youth should be encouraged to attend higher education and wildlife technical colleges to learn about the values of wildlife. Finally, the governance structures must be improved to make them gender equitable, participatory, transparent, and fully accountable to the communities and all citizens.
Consequences of Organic-Mineral N Soil Fertility Amendments on Nitrogen Uptake and Maize Grain Yield in the Smallholder Farms of Meru South District, Kenya
(Sky Journal of Soil Science and Environmental Management, 2012-11-06) Mutegi, Edwin Mwiti; Kung’u, James Biu; Muna, Mucheru; Mugendi, Daniel
The central highlands of Kenya is generally densely populated and declining land productivity with reduced crop yields has been a major problem facing the smallholder farmers in the region. Land sizes are small and this promotes continuous cropping with limited scope for crop rotation and inadequate soil fertility replenishment. Efficient use of soil N amendments in maize (Zea mays L.) production is necessary to maximize producer’s economic returns and maintain soil and water quality. An experiment was carried out on the humic nitisols in Mucwa location, Meru South District, with the objective of determining maize grain yields and N uptake under different soil N amendments. The experiment was set in randomized complete block design (RCBD) with three replicates. The results reveal that maize grain yields in the organics and/or mineral N soil amendments was higher than the yields obtained where the recommended mineral fertilizers were used alone. The nitrogen (N) concentration in different parts of the maize crop varied, with the grain having the highest, followed by the stover during the 2005 short rain season. Sole application of calliandra recorded the highest N uptake (170.8 kg N ha-1) while the control gave the lowest (49.31 kg N ha-1). It is therefore concluded that differences in nutrient release by the organic-mineral N soil amendments can alter net rate of nutrient uptake during crop growth and therefore assist in synchronization of nutrient release and uptake by the growing crop.
Determinants of Equilibrium Real Exchange Rate and its Misalignment in Kenya 2000-2016: An Autoregressive Distributed Lag Approach
(IPRJB, 2019) Gachoki, Charles; Okeri, Susan; Korir, Julius
Purpose: This paper investigates the determinants of Kenya’s real exchange rate and determine the real exchange rate and its misalignment from the long run equilibrium level using quarterly data covering 2000 – 2016. Methodology The Behavioral Equilibrium Exchange Rate approach to determine the extent of exchange rate misalignment is adopted. The study adopted a dynamic Auto Regressive Distributed Lag bounds testing modeling approach. Findings: The estimation results show that, net foreign assets, productivity, world oil prices, trade openness and terms of trade influence Kenya’s long-run real exchange rate. However, government expenditure, and tax revenue were found to have no effect on the real exchange rate. The study results show that the real exchange rate is driven by the economic fundamentals and in terms of misalignment the exchange rate is overvalued to a maximum of 5.9 percent and undervalued up to 5.2 percent but overally the magnitude varies across the period of study. The Shilling is on average undervalued. Unique contribution to theory, practice and policy: Kenya’s exchange rate is closely aligned to its long run fundamentals and the adoption of the floating exchange rate regime achieved one of the intended purpose namely reduction of exchange rate misalignment associated with overvaluation. The monetary authority should ensure the exchange rate remains stable and within the 6 percent range while ensuring the particular fundamentals that can lead to overvaluation are monitored.
Determinants of participation of micro and small enterprises in microfinance in Kenya
(OMICS International, 2018-05-22) Obebo, Forah; Wawire, Nelson; Muniu, Joseph
Microfinance development is one of the avenues that can potentially promote performance of Micro and Small Enterprises (MSEs) especially in developing nations. Despite the development, MSEs continue to suffer from high levels of financial exclusion as well as low participation in microfinance. In the period 2011-2016, at least 2.2 million businesses closed largely due to financial exclusion and shortage of operating funds. In addition, only about 25% of the firms used microfinance credit in the year 2015. This level of usage is considered low in light of the microfinance developments that have taken place in the last decade. Therefore, an understanding of factors that affect participation of MSEs in microfinance is necessary for designing policies and products towards promoting greater participation in microfinance. This is because MSEs are key contributors of income and employment to the economy. Studies on determinants of participation have tended to focus on the household and not MSEs. This study drew data from the 2016 FINACCESS data set and estimated the determinants using a probit model. The results revealed that, age of firm owner, tertiary education level, financial literacy level, numeracy level, ownership of radio, possession of business permit and age of firm are some of the key determinants of participation in microfinance. It is therefore suggested that government and microfinance providers should encourage and upscale financial literacy programmes so as to influence greater participation in microfinance. In addition, the government should create incentives that will increase acquisition of permits and licences by MSEs
Determinants of Utilization of Mobile Financial Services in Small Scale Businesses in Kiambu County, Kenya
(IOSR Journal of Economics and Finance (IOSR-JEF), 2018-08-17) Karanja, Kenneth K.; Onono, Perez O.
The Kenyan government has been implementing policies to expand financial access including promoting mobile enabled financial services to those excluded by the formal banking sector. Majority of small scale businesses in Kenya have no access to a bank account due to limited bank branches and information asymmetry about the sector. To facilitate financial inclusion and reach out to rural areas historically marginalized by convectional banking, mobile network operators have made huge investment to create network and ease access to money. While invention of Mobile money offers financial alternatives businesses have not seized the opportunity. This study investigated the determinants of mobile financial services utilization among small scale businesses in Kiambu County using primary data obtained through interviews with licensed small scale businesses. The logit regression analysis was used and the results indicated that; size of business, age of business, distance to bank, transport cost, business type and sex of business owner were significant determinants of mobile financial service utilization by small scale businesses. The study recommends, infrastructure development by the government to facilitate movement in rural areas and to encourage financial service providers to penetrate with ease, provision of an encouraging environment for business to thrive and improvement of mobile financial services by the mobile network operators

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