Relationship Between Macroeconomic Variables and Foreign Direct Investment a Case of Kenya

Abstract

The study aimed at determining the relationship between macroeconomic variables and foreign direct investment in Kenya. The objective was to assess how the selected macroeconomic variables such as exchange rate, inflation, interest rate, gross domestic product do relate or affect the inflows of foreign direct investment. The study adopted descriptive statistics as the appropriate research design for the study. Secondary data was collected on annually basis from Kenya National Bureau of statistics, central bank of Kenya, World Bank website, and UNCTAD Website. The period of the data collected range from 1970 to 2016, literally 47 years, SPSSS version 20 was used to analyse the data. The analysis found strong positive correlation between FDI and GDP and between FDI and exchange rate as well. However relationship between FDI and inflation rate as well as relationship between FDI and interest rate to be weak. Based on the results, the recommendation is that great deal of attention needs to be paid to fluctuation of macroeconomic variables, for they influence foreign investors’ decision. This suggestion is derived from the that fact that findings shows selected macroeconomic variables relate or affect foreign direct investment in one way or another.