Foreign Direct Investment, International Trade And Economic Growth in Kenya
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Date
2015
Authors
Maranga, Jared Nchogu
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
Foreign Direct Investment and international trade have remained vital for many
governments, with a number of pol icies put in place to promote them. This is due to the
theoretical provisions which have pointed that any increase in foreign direct investment
and international trade has positive and significant effects on the economic growth of
the host country. Based on these theories a number of empirical studies have been
carried out to determine the effects of foreign direct investment and international trade
on economic growth in the host countries including Kenya. However, findings from the
respective studies have presented mixed findings and as such no clear conclusion has
been drawn. Therefore the objective of this study is to determine the effects of foreign
direct investment and international trade in Kenya following continued implementation
of policies geared towards attracting foreign direct investment and promotion of
international trade. Secondary data obtained from World Bank Development Indicators,
statistical abstracts and economic surveys was analysed. The study used the
autoregressive distributed lag approach in regressing real gross domestic product
growth on foreign direct investment, exports, imports, tax revenue and external debts
for the period 1970-2013. From the results the foreign direct investments and natural
logarithm of exports in gross domestic product of Kenya have a positive and significant
effect on economic growth. On the other hand the results show that; imports, lagged
value of tax revenue and external debt stock as components of gross domestic product
had a negative and significant effect on economic growth. From the findings it is
evident that the government should consider pursuing policies geared towards
promoting foreign direct investments following the fact that it has a positive effect on
economic growth. Equally, it is evident that exports play a vital role in boosting
Kenya's economic growth and as such any policies put in place by the government to
make Kenya's exports competitive should be encouraged. However, there is need for
government to control its external borrowing owing to the fact that the results show that
external debt as a component of gross domestic product has a negative and significant
effect on economic growth
Description
A Research Project Submitted to the Department of Applied Economics in Partial Fulfillment of the Requirements for the Award of the Degree of Masters in Economics (International Trade and Finance) of Kenyatta University, November 2015.