Impact of foreign aid on domestic savings in Kenya
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Date
2008Author
Kibiru, Jane Wangechi
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
Earlier papers written on the subject of the effect of foreign aid on domestic savings
disagreed on whether this effect is positive or negative. However they were empirically
consistent in finding this correlation to be negative.
Theoretically, foreign aid is assumed to be additive to domestic savings, therefore
causing an increase in economic growth and hence domestic savings (Chenery & Strout,
1966).This study sought to establish the impact of foreign aid on domestic savings in
Kenya. The empirical results established an inverse relationship. There is a negative and
significant relationship between foreign aid and domestic savings.
Under Vision 2030, oversees development assistance (ODA) has been identified as one
of the ways of alleviating the low savings to GDP ratio constraint .For foreign assistance
to be more effective in playing this role, there are areas particularly the frequency and the
continuity of the inflow of aid, project and programme combination and the terms on
which aid is granted, which could be improved upon so as to make the aid flow more
effective. Issues of fungibility and the impact of foreign aid on private sector investment
warrant further investigation in Kenya.
The period under study are periods of decadence when foreign aid become the main
source of development finance, in which case its effectiveness could have been drowned
by the many demands. This period also witnessed two major donor-aid freezes. This aid
uncertainty may have had adverse effect on government expenditure causing a reduction
in public investment which may have led to lower private investment and ultimately
lower economic growth and domestic savings.
The study has also established that growth in GDP and inflation are significant factors.
influencing domestic savings in Kenya: -Exports are not ambiguous in explaining
. domestic savings in Kenya. This would simply add to the calls for diversification of
exports to include manufactures.
Citation
M.A (Economics) Thesis 2008Sponsorhip
University of NairobiPublisher
Depatment of Economics, University of Nairobi
Description
Master of Art Thesis