EFFECT OF MACROECONOMIC FACTORS ON ECONOMIC GROWTH IN KENYA
Keywords:
Macroeconomic factors, inflation, interest rate spread, economic growth, exchange rates.Abstract
Purpose: The main aim of this investigation was to establish the effect of macroeconomic factors on the economic growth of Kenya.
Methodology: Descriptive research technique was applied. The sampling frame in this investigation was composed of the monetary enumeration of data of the variables under investigation, that is, a list of Inflation, interest rate and exchange rate data obtained from CBK and unemployment list and that of economic growth in terms of GDP obtained from the KNBS for the periods 2008 to 2017. The study utilized the census approach which means that all the data from the sampling frame was used. The gathering point for this research was secondary sources. The data was collected from the Kenya Central Bank's and Kenya National Statistical Bureau's (KNBS) economic reports and documents. The study utilized panel data analysis techniques.
Findings: The long-run effect was negative but insignificant (β= -0.1211, p=0.3419). While else in the short run the results indicated that interest rate spread was found to positively and insignificantly affect economic growth in the short run. Additionally, in the long-run effect, the link between unemployment and economic growth was negative and significant as shown by (β= -3.29756, p=0.0009). However, in the short run, unemployment was also found to have a negative and significant effect on economic growth.
Unique contribution to theory, policy and practice: The policymakers should set strategic measures that will guarantee stable trade rates in a way that it is going to improve the exports. The government should come up with effective macro-economic policies and ensure improvements in the structure and functioning systems of governance for stabilizing economic growth along with job creation. The government needs to create a conducive environment and flexible labour market policies or legislations that entice many private sectors and small businesses which will, in turn, consolidate the existing entrepreneurship activity with new entrepreneurial entrants so as to create more employment and absorb a large pool of an unemployed population.
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