MST-Department of Econometrics and Statistics

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    Effects of Value Added Tax Refunds on Volume of Exports by the Kenyan Firms
    (Kenyatta University, 2024-06) Omwenga, Walter Mokaya
    Value Added Tax (VAT) is a consumption-based tax that is levied at each stage of product’s production and distribution. The long process of VAT refund and delays in refund payments arguably deprive export firms their working capital, which affects their operations, output and business profits. This may force export firms to alter their blend of production and/or reduce their export production. This study sought to look at how VAT refund affects the export performance of Kenyan firms. Specifically, the study sought to: estimate the effects of the payment of VAT refunds on export volume of firms in Kenya and establish the effects of time taken to pay the VAT refunds on export volume of firms in Kenya. The study utilised a non-experimental research design. The study employed unbalanced panel data consisting of 43 export firms observed at three different periods (2017, 2018 and 2019). The study was faced by missing data challenges thus firms included in the analysis are those that had data on dates of VAT refunds lodgments, approval and payments, VAT refund amounts; and at least three years’ observations on exports performance. The study employed Pooled Ordinary Least Square (OLS) model in the analysis, with the second empirical model including the sector dummies to control for the sector specific characteristics to achieve the first objective. The descriptive analysis which was used to address the second objective shows that the average refunds paid by the Kenya Revenue Authority (KRA) to the firms during the three-year period was Kshs 33,542,610.80, with a minimum value of Kshs 1,000,221.77 and a maximum value of Kshs 423,899,228.03. Additionally, the descriptive statistics show that on average, it took five and a half months to verify the refund claims during the period. The shortest time taken to verify VAT refund claims was one month while the longest it took was 14 months. However, it took only one month to pay the VAT refund claims after they were verified. This means that the payment for VAT refunds is well provided for thus the challenge is with the time taken to verify the refund claims. The empirical models showed that payment of VAT refunds has a positive relationship with export performance, meaning that efficient payment of VAT refund is likely to lead to an increase in export performance in Kenya. Moreover, the results from both models also showed that delay in verification of the VAT refunds negatively affects export performance of the Kenyan firms. The study recommends a review of the 100% VAT refunds verification requirement to reduce the refunds claims verification period and VAT data cleaning to improve on the VAT refunds data quality for analyses to inform management decision making and also risk profiling of VAT taxpayers.
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    Youth Participation in Agriculture and Its Effect on Welfare: The Case of Youth in Bomet County, Kenya
    (Kenyatta University, 2024-03) Kiprono, Kevin
    Kenya’s youth unemployment rate stands at 39 percent, forming the largest group of the unemployed in the country. The cohort possesses innovative behavior, minimal risk aversion, less fear of failure, less conservativeness, greater physical strength and greater knowledge acquisition propensity. The agriculture sector offers a huge opportunity for the creation of employment for the youth in the country. Despite the vital role the agricultural sector plays in the economy of Kenya, youth are yet to fully exploit its potential. Like in other countries, literature posits that youth participation in agriculture is low and major determinants of participation in agriculture are; education level, access to land, access to finance, household size and access to market. Youth perceive agriculture as a career of last resort that has low monetary benefits. The study sought to establish the determinants of youth participation in agriculture and its effects on the welfare of the youth in Bomet County. The County of Bomet was specifically chosen because of its’ vast agricultural land as well as large number of youths who remain unemployed and not participating in agriculture. A sample of 399 youths were picked as a representative sample. The study employed frequencies and percentages in analyzing the descriptive statistics of the study. Logistic and multiple regression were adopted in estimating the study models. The study undertook various diagnostic tests before estimating the models to ensure that the model is fit in determining the relationship of study variables. From the descriptive statistics 61.3 percent of the youth participated in agriculture with majority being males. The results from the study also showed that participating in agriculture improved welfare majorly through increased income and food. Logistic regression model established that marital status, university education, land size, financial access, access to ICT infrastructure, market distance, household size and agricultural training are the determinants of agricultural participation. Model results also established that marital status, university education, land size, financial access, access to ICT infrastructure, market distance, household size and agricultural training significantly influenced welfare of youth practicing agriculture. The study recommends that the government creates financial credit specifically tailored for majority of the youth who do not have the required collateral. There is also a need for the government to build more agricultural training institutes so that youth can learn diverse agricultural productions.
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    Adoption of Green Energy and Testing the Presence of Environmental Kuznets Curve in Kenya
    (Kenyatta University, 2024-05) Kibet,Geofrey Kiprono
    Energy is a determinant of economic growth in any economy, but due to different sources of energy which are categorized into green and non-green energy, there is a need for the economy to reduce the use of fossil fuels and consider using more green energy resources. This is because the use of fossil fuels leads to environmental pollution due to Carbon dioxide emissions into the atmosphere. Reduction of fossil fuel consumption leads to reduction of Carbon dioxide emission into the atmosphere, hence leading to global warming mitigation. The use of Non-green energy sources causes environmental pollution which results in the reduction of social welfare. Since little is known about the relationship between economic growth and environmental pollution in Kenya, and also there was clear policy on rates of substitution between green energy and non-green energy in Kenya. This research project intended to estimate the Marginal rate of Technical Substitution between green energy and non-green energy in Kenya and to ascertain whether the Environmental Kuznets Curve on Carbon dioxide emission is present in Kenya. The study used the Instrumental Variable (IV) approach to estimate elasticities and finally determine the MRTS. The objectives of the study included; first, to test the presence of the EKC hypothesis in Kenya. Secondly, it was to determine the Marginal rate of technical substitution between green and non-green energy in Kenya. The study used secondary time-series data from the year 1964 to 2021 from various sources and adopted the VECM model for analysis. Empirical results revealed that the EKC hypothesis on Carbon dioxide emission exist in Kenya in the long-run and not in the short-run. In the long-run, as per capita GDP grows, the environmental degradation continues to decrease. The study also concluded that Kenya requires more investment in green energy infrastructure in order to replace non-green energy infrastructure without affecting GDP growth. Investing in green energy to promote the use of clean energy, in the long run, leads to sustainable economic development.
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    Effects of Foreign Remittances on Human Development in Kenya
    (Kenyatta University, 2023-07) Musyimi, Daniel Mutuku; Peter Ng'ang’a
    The sole purpose of every government is to improve the welfare of its citizens. That is; to have high standards of living, quality education, good health and a quality general wellbeing. When a country thrives in human richness, then the country can be predicted to be on the rig!l( trajectory of achieving sustainable development goals. The Kenya scenario is no exception because the government has been striving to improve the welfare of its people. Though there has been increase in human development progress in Kenya from 0.468 human development index in 1990 to 0.575 human development index in 2021, the increase is relatively low compared to countries with very high and high levels of human development. Kenya is still in medium level which is far from the standards stipulated by UNDP which recommends countries to have high and very high human development index. Many of studies in Kenya have focused on remittances and education expenditure or remittances and health outcomes hence giving little attention on remittances and human development. This study sought to fill the gap between foreign remittances and human development in Kenya which has not received adequate attention despite the fact that foreign remittance has been one of the leading financial foreign inflows in the country. It is with this regard where the specific objectives sought to establish the effects of foreign remittances on both health index and education index. The study adopted foreign remittance as independent variable while health and education index were treated as dependent variables. To achieve the results, the study adopted vector error correction model (VECM) which falls under ordinary least square (OLS) regression technique. The model helped in determining the long run and short run effects of foreign remittances on health index and education index respectively. The study used time series data from period 1990 to 2021 and was obtained from secondary sources. A non-experimental research design was used to determine the frequency of association between the variables. Statistical results were achieved with the aid of statistical package E-views. The study concludes that foreign remittances have negative and significant effects on both health and education index. The study recommends that relevant authorities should deep in to understand the cause of negative relationship between remittances on both health and education index.
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    Relationship between Macroeconomic Factors and Foreign Direct Investment in East African Community
    (Kenyatta University, 2023-11) Wambua, Mwalya; Stephen Gitahi Njuru
    Foreign direct investments (FDI) are key for the growth of a nation’s economy, since it transfers money, technology, and knowledge to the recciving nation. Governments of many countrics actively seek FDI to promote economic growth and development and may offer incentives. FDI has resulted from globalization through the integration of local or domestic markets with international markets across the globe. However, the inflows of FDI into the East African Community (EAC) remain low compared to other regions. Therefore, the goal of this research was to examine how macrocconomic factors (exchange rate and GDP) affect FDI in EAC countries, through infrastructural development, trade openness, inflation, resource endowment, case of doing business as control factors. The study sought to address two specific objectives; to examine the effect of exchange rate on FDI in the East African Community; and to establish if there is an endogeneity of exchange rate and GDP with respect to foreign direct investment in the East African Community. The target population included Burundi, Kenya, Rwanda, Tanzania, Uganda, and DRC. However, South Sudan, one of the EAC countries, was excluded from the study because it had not been reporting its data to the World Development Index. The study used non-cxperimental research design, and theories such as eclectic paradigm, Keynesian, and Classical to support study variables. The study used published annual data from 2000 to 2021 to estimate Pooled Panel Ordinary Least Square (OLS) to answer the first objective and estimated Instrumental Variable (V) method and Control Function Approach (CFA) to address the second objective. Diagnostic tests, namely normality test, multicollinearity, and heteroscedasticity were conducted. The study found that several factors, such as GDP, infrastructural development, trade openness, resource endowment, and Foreign direct investment (FDI) in the East African Community depends on how easy it is to do business there, whereas the exchange rate was a drag on FDI. Additionally, the results revealed that there was an endogeneity of exchange rate and GDP with respect to FDI in the EAC. The research suggests that policymakers in the EAC need to prioritize improving economic growth in the region by promoting policies that stimulate economic development. EAC countries can foster an environment favourable for business growth by reducing regulatory burdens, promoting transparency, and enhancing the region's ease of doing business generally. Moreover, policymakers in EAC countries should work to stabilize the exchange rate by adopting policies that promote macroeconomic stability. Further research is suggested to be conducted in other regions to compare the results obtained from this study with those obtained from other regions.
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    Effects of Mobile Money Financial Technology Services on Output Growth and Productivity in Kenya
    (Kenyatta University, 2023-11) Wachira, Gladys Njeri; Angelica Njuguna
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    Relationship between macroeconomic factors and foreign direct investment in east African community
    (Kenyatta university, 2023-11) Wambua, Mwalya; Stephen Gitahi Njuru
    Foreign direct investments (FDI) are key for the growth of a nation’s economy, since it transfers money, technology, and knowledge to the receiving nation. Governments of many countries actively seek FDI to promote economic growth and development and may offer incentives. FDI has resulted from globalization through the integration of local or domestic markets with international markets across the globe. However, the inflows of FDI into the East African Community (EAC) remain low compared to other regions. Therefore, the goal of this research was to examine how macroeconomic factors (exchange rate and GDP) affect FDI in EAC countries, through infrastructural development, trade openness, inflation, resource endowment, ease of doing business as control factors. The study sought to address two specific objectives; to examine the effect of exchange rate on FDI in the East African Community; and to establish if there is an endogeneity of exchange rate and GDP with respect to foreign direct investment in the East African Community. The target population included Burundi, Kenya, Rwanda, Tanzania, Uganda, and DRC. However, South Sudan, one of the EAC countries, was excluded from the study because it had not been reporting its data to the World Development Index. The study used non-experimental research design, and theories such as eclectic paradigm, Keynesian, and Classical to support study variables. The study used published annual data from 2000 to 2021 to estimate Pooled Panel Ordinary Least Square (OLS) to answer the first objective and estimated Instrumental Variable (IV) method and Control Function Approach (CFA) to address the second objective. Diagnostic tests, namely normality test, multicollinearity, and heteroscedasticity were conducted. The study found that several factors, such as GDP, infrastructural development, trade openness, resource endowment, and Foreign direct investment (FDI) in the East African Community depends on how easy it is to do business there, whereas the exchange rate was a drag on FDI. Additionally, the results revealed that there was an endogeneity of exchange rate and GDP with respect to FDI in the EAC. The research suggests that policymakers in the EAC need to prioritize improving economic growth in the region by promoting policies that stimulate economic development. EAC countries can foster an environment favourable for business growth by reducing regulatory burdens, promoting transparency, and enhancing the region's ease of doing business generally. Moreover, policymakers in EAC countries should work to stabilize the exchange rate by adopting policies that promote macroeconomic stability. Further research is suggested to be conducted in other regions to compare the results obtained from this study with those obtained from other regions
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    Effect of foreign direct investment on employment and welfare in Kenya
    (Kenyatta university, 2023-11) Mwangangi, Cornelius Malinda; Steve Makambi
    The principal external source of finance for emerging nation is foreign direct investment. Throughout the last 10 years, Kenya has managed to attract a significant amount of FDI which could be due to incentives and stable investment environment which attract foreign investors. However, while attraction and inflow of FDI has been observed, it is not clear whether FDI translates to improvement of employment and welfare. Effectiveness of FDI can either be felt directly or indirectly which include technology transfer, spillovers, employment opportunities, training of laborers among others. Ultimately the study aims to examine the effect of foreign direct investment on employment and whether it translates to improvement of welfare in Kenya. Specific objectives include:(i) to examine the effect of foreign direct investment on employment in Kenya; (ii) to determine the effect of foreign direct investment on welfare in Kenya. Welfare was approached from two perspectives which included the human development index and the gini index. Secondary time series data used was retrieved and compiled from the following databases which included World Bank, the United Nations Development Programme, and the yearly economic surveys conducted by the Kenya National Bureau of Statistics all between 1990 to 2020. Several diagnostics tests were run which include; unit root test, cointegration bound test, autocorrelation test, test for normality, heteroskedasticity test, omitted variable test and model specification test. To address the first objective and the second objectives of the study the ARDL model was used to investigate the effect of FDI on employment and welfare in Kenya. The following conclusion were made from the study; First, HDI was a better measurement of welfare compared to the gini index since FDI, savings, inflation, and GDP have an effect on HDI and on the other hand only savings had an effect on the Gini index. Second, since there exists a negative relationship between FDI and HDI in the short run there is need for government intervention in order to curb the negative effect to avoid compromising education, per capita income and life expectancy. Also, the study concluded that FDI plays a major a role when it comes to employment creation and improvement of long term and short-term welfare in an economy. The study made recommendations on the following; First, the ministry of investment, trade and industry should make the investing environment more friendly to foreign investors, second, to reduce the cost of investment licenses and setting up companies, third, the government of Kenya should maintain a stable political environment, fourth, the government should constantly revise their policies to protect domestic companies from foreign companies and finally the government should channel FDI inflows into investments projects that favour the poor in order to improve welfare
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    Effects of non-performing loans on technical efficiency of commercial banks in Kenya
    (Kenyatta university, 2022-05) Abuga, Frankline Kianyaga; Susan M. Okeri
    ABSTRACT With the formation of very large banks and increased interbank connectivity, the 1992 financial sector reforms resulted in a shift in market power. They also improved the banking sector's resilience and sustainability. The reforms aimed at doing away with regulatory and structured issues hindering efficiency of the sector. However, the increasing trend of Non-performing loans since 2008 as well as the commercial banks’ decline in profitability since 2014, has been a cause of alarm and distress to customers and stakeholders. Although there exists an authority to monitor the operation of banks still their operations are sub-optimal. To improve operations of banks and create assurance to customers and stakeholders this study investigated the role of non-performing loans on technical efficiency of commercial banks in Kenya. The research was motivated by the enormous evidence that the Kenyan financial system is dominated by the banking sphere but little is known about efficiency statistics and determinants of efficiency scores. The study used Data Envelopment Analysis to measure efficiency scores in Kenya's 26 commercial banks; 9 in tier 1, 7 in tier 2, and 10 in tier 3, that existed over the study period (2014-2019); inputs as well as outputs variables were selected depending on the intermediation roles performed by banks. The variables were split into inputs and outputs. The income (a linear combination of non-interest income and interest income) was treated as output. The inputs were non-interest expenditure, equity capital and interest expenditure. The results revealed that there was inefficiency across all the banking categories. Tier one banks operated at 97.5 percent efficiency scores, tier 2 at 78.4 percent and tier 3 at 68.8 percent level. Tobit regression was utilized to examine the impacts of Non-performing loans on the technical efficiency of commercial banks in Kenya. The study regressed Non-performing loans, total loan to total assets ratio, total assets, equity to total assets ratio, and non-interest expenses to total assets ratio on technical efficiency level obtained in the first part. The findings indicated that Non-performing loans have -0.00000000262 effect on technical efficiency of the commercial banks, however the effect is not significant. This study concluded that if the commercial banks need to keep improving their efficiency indices, they need to minimize their non-performing loans by implementing the following recommendations; investing heavily on loan recovery a customer credit score monitoring, relying on private credit collection agencies, that look to solve disputes and seek to refer accounts to the credit reference bureau. This will avoid pilling of non-performing loans on the financial statement of commercial banks and other long term legal process such as court cases.
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    Effects of mobile money financial technology services on output growth and productivity in Kenya
    (Kenyatta university, 2023-11) Wachira, Gladys Njeri; Angelica Njuguna
    The advent of mobile money services in Kenya has revolutionized the financial sector in the country. The rate of uptake for the service- specifically M-Pesa has been nothing but phenomenal. Within 4 years of introduction, the service had reached a high proportion of 80 percent of the Kenyan households. This is in stark contrast to the 60 years it took for Kenya to have electricity- an equally important infrastructure. This service continues to grow and evolve - providing new and more services as the years go by. It has led to the financial inclusion of people who were previously unbanked or under-banked. Africa has for years been leading her counterparts in the number of active accounts and transaction value carried out using mobile money and more specifically, M-Pesa has been heralded to be a global leader in terms of mobile money financial technology services. It is, therefore, not surprising that foreign leaders have traversed for long distances to learn about this Kenyan-bred financial service. This study, therefore, takes cognizance of the massive growth of M-Pesa and its uniqueness in providing solutions for financial inclusion particularly in a developing country like Kenya. The general objective of this study was to analyze the effects of mobile money financial technology services on output growth and productivity in Kenya. The specific objectives were to investigate whether there is a structural change in the output growth and productivity in Kenya due mobile money financial technology services; to quantify the effect of mobile money financial technology services on output productivity in Kenya; and to examine the presence of a leapfrog effect of mobile money financial technology services on output productivity in Kenya. Secondary data was obtained for the years 1980 to 2020 and diagnostic tests for unit root, normality, multi-collinearity, auto-correlation and model misspecification were conducted to ensure that the results obtained were not spurious. The study used the Growth Accounting Method to determine Total Factor Productivity’s contribution to the economic growth in Kenya. A regression analysis was then performed to establish the contributions of different factor variables to the Total Factor Productivity. The findings of the study suggest that there is a structural change in output growth and productivity in Kenya as a result of the introduction of mobile money financial technologies. Mobile money financial technology services were also found to have a significant positive effect on output productivity while leapfrogging did not have a significant effect. Given mobile money’s positive effect on productivity, constraints hindering adoption and use of digital technologies such as lack of electricity access, poor network quality, affordability and lack of digital skills should be addressed for increased productivity. Additionally, a robust cyber security system that ensures client transactions and information is secure should be developed and enforced.
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    Impact of export processing zones foreign direct investments on economic growth in Kenya
    (Kenyatta University, 2022-04) kemboi, Gladys Jelagat
    Export Processing Zones (EPZs) have emerged to be a crucial policy tool among developing countries as a way of capitalizing on the advantages of globalization in the form of trade which follow the inadequacies in import-substitution program. The acceptance of EPZs as a policy tool has been on an enormous rise for a long time even though many EPZs have failed to meet their primary objectives. Nevertheless, numerous EPZs still contribute significantly to the economic growth through exports and foreign direct investment (FDI) as observed in East Asian countries. From literature, many EPZs activities have failed to impact significantly the economic growth despite high investment and tax foregone by governments. In Kenya, only one known study on assessment of whether EPZs help promote economic growth has been undertaken. However, the study was based on limited scope and was carried out when the program was relatively new under implementation. Thus, the general objective of this research was to assess impacts of EPZs foreign direct investments on economic growth in Kenya. The specific objectives were to measure effects of EPZs foreign direct investments (FDI) on economic growth in Kenya and determine the factors that attracts EPZs foreign direct investment. The study used quarterly secondary data spanning 1993 to 2019. The data was sourced from KEPZA, KNBS, CBK and UNCTAD websites. The autoregressive distributed lag (ARDL) model was employed to achieve the first research objective and to determine the strength of the long run relationship among the variables of interests. The short run dynamics were analyzed using the error correction model (ECM)sincethevariablesinthestudywerecointegrated.TheresultsshowthatFDIwithinEPZs in Kenya have a significant negative association with economic growth. This is because of high turnoverofinvestorwithinthezonesafterexpiryoftaxholidaysandincentivesaccordedtothem. Thus, depriving government its resources that could have otherwise been invested in other productive sectors. On the other hand, the second objective of the study was achieved using the ordinary least squares (OLS) estimation. The OLS results found that inflation coefficient has a negative statistically significant relationship with EPZs foreign direct investment. Gross Domestic Product and real exchange rate coefficients had a positive association with EPZs foreign direct investment. External debt was found to be insignificant in determining the FDI within EPZs in Kenya. From results of data analysis, this study found that EPZs foreign direct investments have a significant negative impact on economic growth which is attributed to generous incentives and tax holiday accorded to the zones which in turn generally benefits the investors and not the host country. EPZs output have a significant positive impact on economic growth in the long run in Kenya. While low inflation, depreciation in exchange rate, low economic growth and high GDP significantly play a positive role in attracting FDI within EPZs. Thus, it can be concluded that despite generous incentives accorded to EPZs in Kenya, FDI within the zones do not translate to economic growth in the long run. This can be attribute to high turnover of investors within the zones after expiry of tax holidays and incentives accorded to them, high rate of inflation, appreciation of exchange rate, low production capacity as well as growth in GDP in Kenya. From the findings, the study recommends that the Kenya government should regulate the incentives and tax holidays given to EPZs such that no investor should withdraw at the expiry of tax holidays. This will reduce high turnover of investors at expiry of tax holidays and retain revenue forgone within the economy. Efforts should also be made to allow local firms into the zones since they invariably retain all their profits in the Kenya economy rather than just benefitting foreign investors. This is because over-reliance on foreign investors will not maximize the full benefits from the operation of EPZs.
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    Impact of export processing zones foreign direct investments on economic growth in Kenya
    (Kenyatta University, 2022-04) Kemboi, Gladys Jelagat; Aflonia Mbuthia
    Export Processing Zones (EPZs) have emerged to be a crucial policy tool among developing countries as a way of capitalizing on the advantages of globalization in the form of trade which follow the inadequacies in import-substitution program. The acceptance of EPZs as a policy tool has been on an enormous rise for a long time even though many EPZs have failed to meet their primary objectives. Nevertheless, numerous EPZs still contribute significantly to the economic growth through exports and foreign direct investment (FDI) as observed in East Asian countries. From literature, many EPZs activities have failed to impact significantly the economic growth despite high investment and tax foregone by governments. In Kenya, only one known study on assessment of whether EPZs help promote economic growth has been undertaken. However, the study was based on limited scope and was carried out when the program was relatively new under implementation. Thus, the general objective of this research wastoassessimpactsofEPZs foreign direct investments on economic growth in Kenya. The specific objectives were to measure effects of EPZs foreign direct investments (FDI) on economic growth in Kenya and determine the factors that attracts EPZs foreign direct investment. The study used quarterly secondary data spanning 1993 to 2019. The data was sourced from KEPZA, KNBS, CBK and UNCTAD websites. The autoregressive distributed lag (ARDL) model was employed to achieve the first research objective and to determine the strength of the long run relationship among the variables of interests. The short run dynamics were analyzed using the error correction model (ECM)since the variables in the study were cointegrated.The results show that FDI within EPZs in Kenya have a significant negative association with economic growth. This is because of high turnoverofinvestorwithinthezonesafterexpiryoftaxholidaysandincentivesaccordedtothem. Thus, depriving government its resources that could have otherwise been invested in other productive sectors. On the other hand, the second objective of the study was achieved using the ordinary least squares (OLS) estimation. The OLS results found that inflation coefficient has a negative statistically significant relationship with EPZs foreign direct investment. Gross Domestic Product and real exchange rate coefficients had a positive association with EPZs foreign direct investment. External debt was found to be insignificant in determining the FDI within EPZs in Kenya. From results of data analysis, this study found that EPZs foreign direct investments have a significant negative impact on economic growth which is attributed to generous incentives and tax holiday accorded to the zones which in turn generally benefits the investors and not the host country. EPZs output have a significant positive impact on economic growth in the long run in Kenya. While low inflation, depreciation in exchange rate, low economic growth and high GDP significantly play a positive role in attracting FDI within EPZs. Thus, it can be concluded that despite generous incentives accorded to EPZs in Kenya, FDI within the zones do not translate to economic growth in the long run. This can be attribute to high turnover of investors within the zones after expiry of tax holidays and incentives accorded to them, high rate of inflation, appreciation of exchange rate, low production capacity as well as growth in GDP in Kenya. From the findings, the study recommends that the Kenya government should regulate the incentives and tax holidays given to EPZs such that no investor should withdraw at the expiry of tax holidays. This will reduce high turnover of investors at expiry of tax holidays and retain revenue forgone within the economy. Efforts should also be made to allow local firms into the zones since they invariably retain all their profits in the Kenya economy rather than just benefitting foreign investors. This is because over-reliance on foreign investors will not maximize the full benefits from the operation of EPZs.
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    Effects of Non-Performing Loans on Technical Efficiency of Commercial Banks in Kenya
    (Kenyatta University, 2022) Abuga, Frankline Kianyaga; Susan M. Okeri
    With the formation of very large banks and increased interbank connectivity, the 1992 financial sector reforms resulted in a shift in market power. They also improved the banking sector's resilience and sustainability. The reforms aimed at doing away with regulatory and structured issues hindering efficiency of the sector. However, the increasing trend of Non-performing loans since 2008 as well as the commercial banks’ decline in profitability since 2014, has been a cause of alarm and distress to customers and stakeholders. Although there exists an authority to monitor the operation of banks still their operations are sub-optimal. To improve operations of banks and create assurance to customers and stakeholders this study investigated the role of non-performing loans on technical efficiency of commercial banks in Kenya. The research was motivated by the enormous evidence that the Kenyan financial system is dominated by the banking sphere but little is known about efficiency statistics and determinants of efficiency scores. The study used Data Envelopment Analysis to measure efficiency scores in Kenya's 26 commercial banks; 9 in tier 1, 7 in tier 2, and 10 in tier 3, that existed over the study period (2014-2019); inputs as well as outputs variables were selected depending on the intermediation roles performed by banks. The variables were split into inputs and outputs. The income (a linear combination of non-interest income and interest income) was treated as output. The inputs were non-interest expenditure, equity capital and interest expenditure. The results revealed that there was inefficiency across all the banking categories. Tier one banks operated at 79.5 percent efficiency scores, tier 2 at 78.4 percent and tier 3 at 68.8 percent level. Tobit regression was utilized to examine the impacts of Non-performing loans on the technical efficiency of commercial banks in Kenya. The study regressed Non-performing loans, total loan to total assets ratio, total assets, equity to total assets ratio, and non-interest expenses to total assets ratio on technical efficiency level obtained in the first part. The findings indicated that Non-performing loans have -0.00000000262 effect on technical efficiency of the commercial banks, however the effect is not significant. This study concluded that if the commercial banks need to keep improving their efficiency indices, they need to minimize their non-performing loans by implementing the following recommendations; investing heavily on loan recovery a customer credit score monitoring, relying on private credit collection agencies, that look to solve disputes and seek to refer accounts to the credit reference bureau. This will avoid pilling of non-performing loans on the financial statement of commercial banks and other long term legal process such as court cases.
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    Effects of Non-Performing Loans on Technical Efficiency of Commercial Banks in Kenya
    (Kenyatta University, 2022-05) Abuga, Frankline Kianyaga; Dr. Susan M. Okeri
    With the formation of very large banks and increased interbank connectivity, the 1992 financial sector reforms resulted in a shift in market power. They also improved the banking sector's resilience and sustainability. The reforms aimed at doing away with regulatory and structured issues hindering efficiency of the sector. However, the increasing trend of Non-performing loans since 2008 as well as the commercial banks’ decline in profitability since 2014, has been a cause of alarm and distress to customers and stakeholders. Although there exists an authority to monitor the operation of banks still their operations are sub-optimal. To improve operations of banks and create assurance to customers and stakeholders this study investigated the role of non-performing loans on technical efficiency of commercial banks in Kenya. The research was motivated by the enormous evidence that the Kenyan financial system is dominated by the banking sphere but little is known about efficiency statistics and determinants of efficiency scores. The study used Data Envelopment Analysis to measure efficiency scores in Kenya's 26 commercial banks; 9 in tier 1, 7 in tier 2, and 10 in tier 3, that existed over the study period (2014-2019); inputs as well as outputs variables were selected depending on the intermediation roles performed by banks. The variables were split into inputs and outputs. The income (a linear combination of non-interest income and interest income) was treated as output. The inputs were non-interest expenditure, equity capital and interest expenditure. The results revealed that there was inefficiency across all the banking categories. Tier one banks operated at 79.5 percent efficiency scores, tier 2 at 78.4 percent and tier 3 at 68.8 percent level. Tobit regression was utilized to examine the impacts of Non-performing loans on the technical efficiency of commercial banks in Kenya. The study regressed Non-performing loans, total loan to total assets ratio, total assets, equity to total assets ratio, and non-interest expenses to total assets ratio on technical efficiency level obtained in the first part. The findings indicated that Non-performing loans have -0.00000000262 effect on technical efficiency of the commercial banks, however the effect is not significant. This study concluded that if the commercial banks need to keep improving their efficiency indices, they need to minimize their non-performing loans by implementing the following recommendations; investing heavily on loan recovery a customer credit score monitoring, relying on private credit collection agencies, that look to solve disputes and seek to refer accounts to the credit reference bureau. This will avoid pilling of non-performing loans on the financial statement of commercial banks and other long term legal process such as court cases
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    Impact of Social Franchising on Healthcare Expenditure within Private Facilities in Embu County Kenya
    (Kenyatta University, 2020) Nyaga, Stephen; Susan Okeri
    The Kenyan private health sector is one of the most developed in Sub-Saharan Africa and is highly critical in healthcare delivery. It is often the first point of contact of 47 percent of the first quintile of income earners when they fall sick and 33 percent of women seek family planning services in this sector. Despite private sector ability to provide greater choices for customers, in several parts of Kenya, the cost of health services is a great impediment to service utilization. The concept of social franchising attempts to increase access to services in the private sector through various strategies such as capacity building of healthcare service providers, lowering cost of treatments by provision use of vouchers or supply of subsidized medical supplies and demand creation. However, there is scant literature on the impact of social franchising on healthcare expenditure within private healthcare facilities in Embu County, Kenya. This study investigated how social franchising has affected the consumer expenditure on private healthcare services namely family planning and children treatment services. The family planning methods included three-month short term family planning method Depo-Provera and long term family planning methods IUCD and Norplant’s implants which are supported by social franchisors. The study used a cross-section descriptive study design and conducted a cluster sampling in communities near franchised and non-franchised private health clinics in Embu County. The study used a total of 215 responses analyzed with STATA 14. Descriptive statistics used in this study include mean, median, and frequencies and inferential statistics include binary logistic regression with marginal effects and propensity score matching to determine the impact of social franchising on healthcare expenditure. The results reveal that expenditure on children's illnesses treatments and that of short-term family planning services were not statistically different between franchised and non-franchised health facilities. The study however found that there is a huge variance on the expenditure of long-term family planning services between the two classes of clinics with women in franchised health facilities paying on average $4.5 less due to provision of vouchers by the franchisors. The study recommends expansion of social franchisors network to reach bottom of economic pyramid and scaling up the capacity building of medical workers through training to improve quality of services provided.
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    Sports Betting Participation and its Effects on Youths’ Welfare in Kenya
    (Kenyatta University, 2021) Gathuru, James Muigai; Jennifer Njaramba
    Youths in Kenya have been placing bets on football games, with the hope of winning money and as a form of leisure. Participation in sports betting in Kenya has been increasing since 2013. The number of firms registered to provide sports betting services have increased from 1 in 2013 to 28 in 2018 attracting 5 million active customers in 2018 from 2 million in 2016. The increased participation in sports betting according to literature comes with economic benefitssuch as increase in income but also social cost which include breakage of families,suicide and brankruptcy among others.Since sports betting has been in existense for less than a decade , its effects on the population has not been well documentedin many countries . The aim of this study was to explore sports betting participation and its effects on youths’ welfare in Kenya. Primary data was collected using a structured questionnaire on a random sample of 343 youth in Kajiado North constituency. For objective one, a logistic regression model was specified and Maximum Likelihood Estimation method used to establish the key factors influencing participation in sports betting among the youth in Kenya. The study findings indicate that genger, technology, employment and income were more likely to increase participation in sports betting. Male youths were found tohave a higher likelihood to participate in sports betting compared to their female counterparts. These resultssupport the assertion that the lower the income an individual earns the higher the probability participatingin sports betting. Individuals who are in full employment, self-employed and in part-time employment have a higher likelihood to participate in sports relative to youths who are not employed. The second objective was to determine the effect of sports betting participation on youth welfare. A linear model was specified and Two Staged Least Squares estimation method used to obtain estimates.The results found that there was a negative welfare effect on individuals participating in sports betting. The study recommends sensitizations of the youths on the negative effects of sports betting and employment creation to deter youth from participating in sports betting as a source of income.
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    Community Empowerment and Child Marriage in Kilifi County, Kenya
    (Kenyatta University, 2020-09) Wanyeki, Joyreen Wambui
    Child marriage is a familiar phenomenon in many countries in Africa and Asia. It is a harmful traditional vice, a human rights violation which not only denies young girls a choice on whom to marry, but also exposes them to psychological, social, health and economic risks. Globally, girls from impoverished households are more likely victims of child marriages. Further combined with traditional practices and beliefs, poverty gives education preference to boys in situations of economic constraints. In Kenya, an estimated 23 per cent of girls are married off before 18 years. Kilifi County records the highest prevalence of child marriage with 47.4 per cent of girls married off before the age 18 years. Civil Society organizations in collaboration with the Government of Kenya are actively working towards reduced child marriages through awareness creation on the adverse consequences, presenting viable alternatives and advocating for implementation and enforcement of existing laws prohibiting it. However, several communities proceed with this practice. To better understand the social patterning of child marriage in Kenya, this research targeted Kilifi County. Guided by a model of child marriage, the study explored the effects of community empowerment on child marriage in Kilifi County, Kenya through four specific objectives that explored: the factors influencing child marriage; the effect of knowledge empowerment on child marriage; the effect of scholarship empowerment on child marriage; and the effect of economic empowerment on child marriage in Kilifi County, Kenya. The study adopted a cross-section research design and was informed by primary data obtained through in depth interviews. The study was carried out in Magarini Sub-county, Kilifi County leveraging multi stage sampling design. Research findings indicated that Knowledge empowerment, age at first got married, household composition, access to financial support services (Economic empowerment), access to school feeding programs, access to monetary support to facilitate education, accessibility to schools (Scholarship empowerment) and household incomes, significantly influence child marriage decisions in a household. Based on the findings the study recommendations are :more awareness creation initiatives around abuse reporting channels and legal laws around child marriage, accommodation of interested child brides into the education system either though adult literacy or vocational training programs, access to more favourable and context based financial support initiatives as well as community participation in development through enhanced citizen participation. The study identified gaps in the link between child marriage and devolution as well as climate change, and recommended for further research on the impact of devolution and climate change on child marriage.
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    Threshold Effects in the Relationship between Inflation and Economic Growth in Kenya: 1970-2014
    (Kenyatta University, 2017-07) Mugi, Njenga Kelvin
    It is widely agreed among economists, policy makers and central bankers that all macroeconomic policies seek to attain high levels of economic growth coupled with very low rates of inflation. High inflation rates have resulted to a number of adverse effects on the economic growth of many countries over time. But how low should the inflation rate be so as not to affect economic growth negatively? Economic policymakers in Kenya have been working towards the attainment of a 5 percent rate of inflation as the most ideal rate for economic policy purposes. Is this rate of inflation the most appropriate for economic growth? Recent studies have demonstrated that, inflation only causes detrimental effects in an economy in the event it rises beyond a specific threshold depending on the level of economic development of an economy and the existing economic structure. If the level of inflation is below the identified threshold, then the effect of inflation on economic growth is insignificant or even positive. In an attempt to determine whether or not there existed threshold effects between these two variables of interest in Kenya, this study assumed that economic growth and inflation had a non-linear relationship and used quarterly data spanning the sample period 1970-2014. This study sought;to determine if a first threshold inflation level exists in the relationship between inflation and economic growth in Kenya; to determine if a second threshold inflation level exists in the relationship between economic growth and inflation rate in Kenya; to establish the effect of inflation on the level of economic growth at the estimated lower and upper threshold levels of inflation in Kenya; and to analyze the impact of a structural break on the threshold regression model for the Kenyan economy. A suitable regression model for the threshold was used in this study. The results revealed the existence of two significant threshold levels at 6.1318% and 9.6274%. Inflation causedpositive and significant effects on economic growth at inflation rates below the first threshold level. The effect of inflation on economic growth was also positive and significant at all inflation rates between the two threshold levels. However, at inflation rates above the second threshold level, inflation had a negative effect on the level of economic growth. This study also showed that failure to account for structural breaks in the relationship between economic growth and inflation largely influenced the estimated effects of inflation on growth at the identified threshold levels. The findings of this study provide an important basis for the formulation of monetary policy in Kenya given that they act as a guide in the setting of inflation targets. The findings further provide economic policymakers in Kenya with consistent guidance on matters of inflation in the actualization of long-term economic growth targets.
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    Effect of Energy Price Liberalization on Economic Growth in Kenya (1980 – 2014)
    (Kenyatta University, 2016-11) Luta, Victor Masese
    The main purpose of this study was to determine the effect of energy price liberalization on economic growth in Kenya. Energy sector is an important component of economy, and just like other goods and services, energy price affects its demand, supply and use. The use of energy is embedded in the production function that leads to economic growth. In Kenya, the energy sector contributes about 9.49 percent of GDP with the petroleum sector, electricity sector and fuel wood sector contributing 8.4 percent, 0.6 percent and 0.49 percent respectively. Kenya has initiated a number of reforms to stabilize and promote fair price and efficiency of energy in the economy. Kenya introduced several economic reforms such as energy sector reform of energy price liberalization to promote its economic growth by stabilizing supply and prices of energy and by creating a competitive energy market. Despite implementing these reforms, the Kenyan economy has not experienced double digit rate of economic growth (Ministry of Planning and National Development, 2007). The objectives of the study were to investigate the effects of energy price liberalization on economic growth in Kenya and to find out whether there was a significant difference in stability of energy price during the period of liberalization of energy price and the period of no liberalization of energy price. The study used secondary data covering a period of 35 years from 1980 to 2014. The study extracted data from the Kenya’s Statistical Abstracts of 1980 to 2014. The study used several methods of diagnostic tests such as Augmented Dickey Fuller unit root test, Phillips-Perron unit root test, Ramsey test, Jarque-Berra test and Durbin Watson test. Phillips-Perron unit root test and Durbin Watson test were used to assure robust model estimation. Stability tests found that there was significant difference in the stability of energy price before and after the liberalization of the energy price. OLS regression estimates indicated that energy price liberalization had a negative effect on economic growth in Kenya. The coefficient value of the dummy variable was -0.1607 with a probability value of 0.0367 and suggested that energy price liberalization was significant in explaining economic growth in Kenya. The study recommended reevaluation of energy sector reform of energy price liberalization and also encouraged implementation of reforms in other sectors of the economy.
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    Analysis of the Value Added Tax and Household Final Consumption Expenditure in Kenya for the Period 1990 - 2014
    (Kenyatta University, 2017-07) Kathure, Imaana Finnian
    Household final consumption expenditure (HFCE) is the largest constituent of Kenya’s Gross domestic product, representing overall around 60 per centof Gross domestic product.Moreover, consumption is a major impelling cause of Kenya’s economic growth. HFCE growth has been increasing with increasing growth of value added tax (VAT) revenue for most years.Moreover, growth of value added tax revenue hasbeen increasing more rapidly between financial years 2012/2013 and 2014/2015 due to the introduction of the new VAT Act 2013 which saw the list of exempt and zero rated goods and services reduce. With the rising growth of VAT revenue, growth of private consumption expenditure is likely to reduce in the future leading to reduced economic growth. The motive of this study was to investigate the impact of VAT on household final consumption expenditure in Kenya from 1990 to 2014. The study employed Vector Error Correction (VEC) technique to investigate the dynamic response of household final consumption expenditure growth in Kenya due to shocks in growth of VAT revenue, growth of disposable income and growth of inflation rate.Granger causality test was done to enlighten on the relationship between value added tax revenue and household final consumption expenditure in Kenya. The study used quarterly time series data from 1990 to 2014. The analysis revealed that value added tax revenue growthmoderately affects HFCE growthin Kenya. The study also found that increasing VAT revenuegrowth curtailed household final consumption expenditure growthin the shortrun but stimulated household final consumption expenditure growth before stabilizing itin thelong-run. These effects was statistically significant. Additionally, growth in household final consumption expenditure and growth in value added tax revenue do not granger cause each other. The study concluded that the government should look for other ways of raising VAT revenue instead of increasing the tax base. For instance, KRA should fully institutionalize ETR machines into its system and that the government should focus on ensuring that all traders have the machines and are well trained on how to use them to help seal loopholes of remitting VAT revenue by the traders.