This paper scrutinizes whether government borrowing in Eastern Europe is grounded on the need to provide infrastructure and public amenities as provided in the budget or is triggered by government deficit budgeting. European Union countries have experienced accelerated growth in public debt in the last half a century despite growing tax revenue and cuts in public spending. The purpose of this paper is to investigate the direct and indirect links among public debt, tax revenue and government e...
This study is a comparative analysis of Kenya and South Africa, the largest economies in Eastern and Southern Africa respectively, based on gross domestic product (GDP), energy use and carbon emissions. This study investigates the contribution of economic growth and renewable energy use on greenhouse carbon dioxide emissions in both country-level and group data, to observe their possible impact on environmental pollution. The present study addresses United Nations Sustainable Development Goal...
e modern devolution development across the globe has been in part driven by assertions of a supposed ‘economic dividend’ linked with the devolved expenditure. There is however, little empirical evidence to validate these assertions in Kenya. Most empirical studies across different countries have used different methods of analysis, different time periods and diverse techniques of measuring variable which have generated mixed conclusions and others are inconclusive. More so, in Kenya these ...
Abstract In this paper, we explore the dynamic relationship between aggregate foreign equity inflows and aggregate liquidity of the Kenyan stock market using transactional foreign trading data and several liquidity measures. We employ vector auto regression with monthly gross foreign inflows, local stock market liquidity and returns over the period 2011–2018. We discover a one- way causality link from inflows to liquidity and that foreign investors promote rather than impede local liquid...
Abstract In this paper we examine the role of illiquidity and foreign investor preferences in asset pricing in the Kenyan frontier stock market. Since stock illiquidity and heterogeneous foreign investor preferences are pervasive features of this market, investors are likely to demand higher compensation for holding illiquid and less foreign investor-preferred stocks, thereby increasing cost of equity. We test this hypothesis by incorporating an illiquidity and foreign stock holding factor i...
Abstract This paper explores the role of macroeconomic conditions on systematic stock market liquidity in Kenya. The study first estimates the monthly probability of liquidity switching from a high to a low liquidity state using the Markov regime switching framework. Then, using ordinary least squares, the study identifies macro factors that significantly drive liquidity fluctuations. Importantly, monetary policy changes, exchange rate fluctuations and global risk aversion are found to signi...
Abstract Small and medium enterprises are a key engine of economic growth in both developing and developed countries. Small and medium businesses being profit making institutions are expected to pay taxes to the government. Therefore, tax compliance is critical in all economies which recognize the role played by revenue collected from tax in national development. Nonetheless, developing countries are dominated by low tax compliance levels, in the face of the frequent appeal from tax collecto...
Abstract Purpose: To estimate the optimal levels of real economic growth rate needed to stabilize debt levels and carry out a stochastic debt simulation to determine the possible future debt path and its distribution in Kenya. Methodology: The paper used time series data from 1963 to 2015. Auto Regressive Distributed Lag (ARDL) bound test procedure was used to test for short run and long run relationships among the variables. A VAR model was estimated followed by a simulation process to fore...
Abstract Fiscal policy in Kenya has been unstable. Fiscal balance to GDP ratio worsened from a surplus of 0.2 percent to a deficit of 7.6 percentwhile debt to GDP ratio rose from 25.4 to 56.2 percent between 1963 and 2015. This was against deficit target of 4.8 and debt ratio of 41.4 percent in 2015. The continued build up of debt implies debt stabilization is not a priority and high debt may lead to adverse effects to the economy. The paper estimated the optimal fiscal balance to GDP ratio ...
Abstract Kenya has experienced persistent current account deficits that have remained underneath the threshold that economists would consider sustainable. At the point when a nation runs steady current account deficit for a long period, it raises worries about the sustainability of this deficit. The persevering current account deficit has led to increase of liabilities to the rest of the world that are financed by the capital account surplus. These should be paid back in the long run. There ...
Abstract Most studies on private capital inflows and economic growth are cross-country and give more weight to foreign direct investment than the other components of private capital inflows. In addition, the question as to whether it is private capital inflows that promote economic growth or it is economic growth that attracts private capital inflows has not been investigated in Kenya. This study investigated the causality between foreign direct investment, portfolio investment and cross-bor...
Abstract Statistics show that remittances to Kenya have been increasing over the years. Studies on the effect of remittances on economic growth in Kenya are limited and have not included private capital inflows as one of the determinants of economic growth. This study investigated the effect of remittances on economic growth in Kenya. Data was sourced for the World Bank's African Development Indicators and various Economic Surveys and Statistical Abstracts for the period 1970-20 IO. The stud...
Abstract This study attempted to empirically examine the effect of labour diversity on firm’s productivity in Kenya. To achieve this objective primary data was collected from various firms. Thereafter analysis was done using Feasible Generalized Least Square method (FGLS). According to the study, firms that had more labour diversity in terms of skills and gender were more productive. But ethnic diversity had no impact on productivity. This is a crucial finding given the ongoing debate on t...
Abstract The study was done to investigate the effect of FDI on economic growth in Kenya, to determine the influence of institutional quality on the effect of FDI on economic growth, and to determine the effects of structural breaks on economic growth in Kenya. This was based on the failure of the reviewed studies to capture the role of institutional quality in this effect. Markets that are likely to persist in low-quality-institution jurisdictions are those in which exchange is simultaneous...
Abstract Foreign Aid, Foreign Direct Investment and Remittances remain important and stable source of foreign capital inflows to developing countries, as they bring in large amounts of foreign currency that help sustain the balance of payments. Studies have for years examined the nexus between aid and growth, FDI and growth and to a limited extent remittances and growth. While the focus has largely been on the first two nexuses, there is an increasing literature on the remittance-growth nexu...