The Impact of Public Debt on Inflation, Gdp Growth and Interest Rates in Kenya
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Date
2012Author
Harmon, Emmanuel Y
Type
ThesisLanguage
enMetadata
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This research looks at the impact of public debt on three major economic indicators
(Inflation, GDP growth and Interest rates) in Kenya. The study was conducted with the
objective of finding out the relationships that exist between these variables and public
debt.
The study draws upon secondary data on the mentioned variables published by the
government of Kenya covering the period 1996 to 2011. Most prior researches on public
debt focus on its links with single variables and sustainability issues. Findings from these
studies vary across variables. Some studies show positive relationships, others negative
relationships while others show mo relationships at all.
The study adopts a descriptive research design in studying the impact of public debt on
inflation GDP, and interest rates in Kenya. Using three simple linear regression models,
the study finds out that there is a weak positive relationship on the public debt-inflation-
GDP growth link with the public debt-GDP growth link being the highest. A negative
strong relationship is observed alone the public dept-interest rates link.
On a general note, the study concludes that the Public Debt-Inflation-GDP growth-
Interest rates link cannot be found in a single analysis. The relationship varies across
variables. While other variables show a weak relationship others portray a strong one. For
instance, of the variables compared in this study public debt and interest rates show the
strongest relationship. Next is the relation between public debt and GDP growth which is
moderately weak; and finally public debt and GDP growth which shows the least among
the three variables.
Apart from sustainability concerns, high public debt levels may directly or indirectly
harm economic growth. To mitigate this situation policy makers are urged to consider
tightening and streamlining new borrowings to development needs and prioritize such
needs to provide a conducive macroeconomic environment.
Citation
Master in Business AdministrationSponsorhip
The University of NairobiPublisher
University of Nairobi, School of Business