Demand for new passenger cars and pick-ups in Kenya an empirical study

Abstract

The automobile industy is an important sector in many modern economies. In Kenya, the government's policy on this industry has been characterized by various inconsistencies. This study sought to identify the determinants of demand for automobiles in Kenya, their statistical significance and policy implications. The parameters in the model were estimated using time series data for the period 1970-86. The demand for cars was found to be determined by the stock of cars' own price, personal income and government policy. These findings show that fiscal and monetary policies do affect the demand for cars considerably. The demand for pick-ups was found to be determined by national income and stock of pick-ups; this contradicts the general belief that price is the major determinant of demand lor commercial vehicles. The government therefore could rationalize the operations of the sector through fiscal policies without undermining the economy