FOREIGN CAPITAL FLOWS AND ECONOMIC GROWTH OF KENYA.
DOI:
https://doi.org/10.47604/ijfa.752Keywords:
cash flows, economic growth, direct investments, portfolio investments, commercial borrowingsAbstract
The purpose of the study was to establish the effects of foreign capital flows on economic growth of Kenya. The study employed a quantitative research design. The target population of this study was Kenya since it is the Center of analysis. Considering that the population is one country, Kenya, secondary data was collected over a period of 25 years from 1993 to 2017. Therefore, the number of observations was X * 25 = 25. The research conducted a census on Kenya using secondary data from Nairobi Securities Exchange (NSE), Capital Markets Authority (CMA), Kenya National Bureau of Statistics (KNBS), Central Bank of Kenya, World Bank and United Nations Conference on Trade and Development (UNCTAD). Data over time was analyzed using a time series model and trend analysis. Model test and correlation analysis were done before conducting regression and univariate regression analysis. The study found that, when external commercial borrowing is increased by one US dollar, annual GDP will increase by 395.990% when all other factors are kept constant. The opposite also applies. But, if external commercial borrowing is zero, annual GDP will decrease by USD 8,151,662,920.94 when all other factors are kept constant. Additionally, when Foreign Portfolio investment is increased by one US dollar, annual GDP will increase by 805.37% when all other factors are kept constant. The opposite also applies. But, if Foreign Portfolio Investment is zero, annual GDP will remain to be USD 25394237979 when all other factors are kept constant. Also, when FDI is increased by one US dollar, annual GDP will increase by 3026.30% when all other factors are kept constant. The opposite also applies. But, if FDI is zero, annual GDP will still increase by USD 18493289187.3 when all other factors are kept constant. Further results revealed that when Non-Resident Kenyan Deposits are increased by one US dollar, annual GDP will increase by 3738.65% when all other factors are kept constant. The opposite also applies. But, if Non-Resident Kenyan Deposits is zero, annual GDP will remain to be USD 4869680695.47 when all other factors are kept constant. The study recommends that the Government pursues policies that will attract and favour net increases in Foreign Direct Investments, Foreign Portfolio Investments, External Commercial Borrowings and Non-Resident Kenyan deposits into the country.
Downloads
References
Adeniyi, O., Oyinlola, A., Omisakin, O., & Egwaikhide, F. O. (2015). Financial development and economic growth in Nigeria: Evidence from threshold modelling. Economic Analysis and Policy, 47, 11-21.
Barajas, J. N. (2009). Private capital flows, financial development, and economic growth in developing countries. Ottawa: Bank of Canada.
Boskovska, L. M. (2004). Financial institutions and markets: structure, growth and innovations, 4e. Tata McGraw-Hill Education.
Checherita-Westphal, C., & Rother, P. (2012). The impact of high government debt on economic growth and its channels: An empirical investigation for the euro area. European economic review, 56(7), 1392-1405.
Giuliano, P., & Ruiz-Arranz, M. (2009). Remittances, financial development, and growth. Journal of Development Economics, 90(1), 144-152.
Kim, J, (2009). Remittances, financial development, and growth. Journal of Development Economics, 90(1), 144-152.
Lensink, R., Bo, H., & Sterken, E. (1999). Does uncertainty affect economic growth? An empirical analysis. Weltwirtschaftliches Archiv, 135(3), 379-396.
Levin, J. (2001). Globalizing the community college: Strategies for change in the twenty-first century. Springer
Mugenda. (2004). Research Methodology: Methods and techniques. New Age International
Muinga, R., Bo, H., & Sterken, E. (1999). Does uncertainty affect economic growth? An empirical analysis. Weltwirtschaftliches Archiv, 135(3), 379-396.
Narayan, P. L. (2015). An extensive exploration of theories of foreign direct investment. Risk Governance & Control: Financial Markets and Institutions, 5(2), 77-83.
Okofar J. L., & Ebeke, C. (2011). Remittances and household consumption instability in developing countries. World Development, 39(7), 1076-1089.
Stilglitz, C., & Kubota, M. (2012). Gross inflows gone wild: gross capital inflows, credit booms and crises. The World Bank.
Tobin, M. T., Chami, M. R., Montiel, M. P., Barajas, M. A., & Fullenkamp, C. (2009). Do workers' remittances promote economic growth? (No. 9-153). International Monetary Fund.
Wande, J. N. (2000). Private capital flows, financial development, and economic growth in developing countries. Ottawa: Bank of Canada.
Yang, G. L. (2003). Varieties of currency crises (No. w10193). National Bureau of economic research
Downloads
Published
How to Cite
Issue
Section
License
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work’s authorship and initial publication in this journal.
