Government Infrastructure Spending and Economic Growth in Kenya: An Autoregressive Distributed Lag Model Approach
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Date
2023
Authors
Susan K., Matheka
Etyang, Martin
Journal Title
Journal ISSN
Volume Title
Publisher
IPRJB
Abstract
Purpose: Since independence, the Government of Kenya has
pursued many objectives, one being economic growth. Over the
previous few many years, government expenditure has been
developing faster than the GDP growth. Infrastructure, one of the
components of public spending, has also experienced tremendous
growth in government spending and development, which has not
been directly reflected in the GDP growth rate. Following such
situation, it calls for analyzing the impact that government
infrastructure expenditure has on economic growth in Kenya with
a focal point on three sectors beneath infrastructure that the public
sector spends closely on; transport, energy and fuel, and
Information Communication and Technology (ICT). The study's
overall objective is to find out the effects of government spending
on the three sampled sectors of government infrastructure on
economic growth in Kenya and then draw policy implications
from the findings. The specific objectives were; to investigate the
effect of transport infrastructure expenditure on economic growth
in Kenya, to examine the effect of energy & fuel infrastructure
expenditure on economic growth in Kenya, and to examine the
effect of ICT infrastructure expenditure on economic growth in
Kenya. Further, Bounds F-test to cointegration as well as the
Autoregressive Distributed Lag Model (ARDL) were used to
realize the objectives.
Methodology: The data was collected covered 1990 – 2020 for
the three sectors of infrastructure: transport, energy & fuel, and
ICT. Several tests on the time series data were carried out on the
secondary data obtained, after which (ARDL) was employed in
analysing the data.
Findings: The outcome showed that government expenditure on
transport, energy, fuel, and ICT infrastructure sectors affected
economic growth either in the short or the long run. Based on the
ECM regression findings, the long-run regression outcome
revealed that expenditure on energy and fuel promotes economic
growth. On the contrast, the findings showed that government
expenditure on transport and ICT sectors exhibited a negative
effect on GDP growth rate. Public expenditure on transport and
ICT infrastructure sectors positively impacted economic growth
in the short term, while the energy and fuel sectors exhibited a
negative impact on GDP. Other control variables inclusive of
trade openness and FDI showed either a positive or negative
effect on economic growth either in long or short run. Inflation,
particularly, exhibited a negative effect on GDP in the long run,
in addition to within the short run.
Unique Contribution to Theory, Practice and Policy: Based on
the empirical findings, this study validates the Keynesian theory
which stipulates that public expenditure positively contributes to
economic growth. Based on this theory, public expenditure is an
exogenous factor capable of being applied as a policy instrument
in promoting economic growth.
Description
Article
Keywords
Infrastructure, Spending, Economic Growth, ARDL
Citation
K., M., & Etyang, M. (2023). Government Infrastructure Spending and Economic Growth in Kenya: An Autoregressive Distributed Lag Model Approach. International Journal of Economics, 8(1), 1–29. https://doi.org/10.47604/ijecon.1780