Effect of Government Expenditure on Selected Sectoral Output Performance in Kenya
Loading...
Date
2020
Authors
Tenai, Amon Kipruto
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
Government expenditure is a key component for guaranteeing a nation assigns and spend
budgetary resources to accomplish a robust economic performance. However, the achievement of
macroeconomic objectives, from time immemorial, has been a policy priority of every economy
whether developed or developing. However, government expenditure still remains an important
issue in global debates. The concern is whether or not government expenditure increases the output
of different sectors in the economy. Over the past three decades, government spending has been
growing at rapid rate in Kenya. The general objective of this study was to examine the relationship
between government expenditure and selected sectoral output performance in Kenya. The specific
objectives are: to determine the effect of government expenditure on agriculture sector output
performance in Kenya. Secondly, is to determine the effect of government expenditure on
manufacture sector output performance in Kenya. Lastly, is to determine the effect of government
expenditure on service sector output performance in Kenya The study analyzed three sectors in
Kenya that is agriculture, service and manufacturing which are the main stimulus for the economy,
and focus on the variables that affect the sector output performance that is, government
expenditure, public debt servicing, inflation, interest rates, private investment, terms of trade and
exchange rate. The study adopted annual time series data for the period 1980 to 2016 to evaluate
the effects of government expenditure on selected sectoral output performance in Kenya where
ARDL model was used. Unit root test was conducted to test for stationarity and Johansen
cointegration test was conducted to establish if there was short-run or long-run relationship
between the variables that affected real sector output performance. The study found out a positive
relationship between government expenditure and agriculture output performance. The study also
found a positive relationship between government expenditure and manufacturing output
performance and lastly, the study found out a positive relationship between government
expenditure and service output performance. The results implied that this causation should be a
vital tool for designing government expenditure policies in the economy
Description
A Research Project Submitted to the Department of Economic
Theory in the School of Economics in Partial Fulfillment of the
Requirements for the Award of the Degree of Master of
Economics of Kenyatta University.
Keywords
Government Expenditure, Sectoral Output Performance, Kenya