Response of economic growth to domestic borrowing, governance and market reforms in Kenya
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Date
2015
Authors
Kimolo, Dorothy Ngina
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
The Kenya vision 2030 aims at achieving a sustained 10 per cent per annum
growth rate in the economy by 2012 as well as reducing domestic debt levels to
below 25 per cent of GDP but these targets have not been achieved. Post
independent Kenya has also experienced changes in governance as well as
market liberalisation. The study therefore aimed at analysing the response of
economic growth to domestic borrowing, governance and market reforms. The
study used time series data for 1971-2013. A multivariate linear regression
model was used to analyse the response of economic growth to domestic debt
in Kenya while dummies and interaction terms were used to capture the
moderating effects of changes in governance and market reforms on the
response of economic growth to domestic borrowing in Kenya. After the
regression, diagnostic tests were performed on the models to check their
statistical soundness. The models passed all the tests so the results were
considered reliable. The study found that economic growth responded
negatively to domestic borrowing. Economic growth responded negatively to
Private Consumption and Inflation while it responded positively to growth in
Private Investments and Net exports. Market reforms were found to have no
significant effects on economic growth. Economic growth in the third
governance under President Mwai Kibaki was higher than in the governance
regime under President Jomo Kenyatta. Domestic debt and the governance
under President Mwai Kibaki had own significant effects on economic growth
but did not have any joint effects on economic growth in Kenya. From the
results the study recommends that the government should pursue policies
aimed at reducing growth in domestic debt in Kenya to minimize the negative
effects on economic growth. The government should also work on measures to
curb inflation while ensuring private investments and net exports are on the
rise.
Description
A research project submitted to the department of applied economics in partial fulfilment of the requirements for the award of the degree of master of economics (finance) of Kenyatta University.