Financial liberalization and fiscal variables in Kenya
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Date
2001Author
Bagha, Hassanali N
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
This study has attempted to highlight one of the specific areas that are affected by
financial liberalisation. It was exploring into the response of fiscal variables to financial
sector reforms and what kind of fiscal policy mix is available to implement in a
liberalised financial market. Fiscal deficit was chosen as the representative variable and
broken into expendiure and revenue and data was collected from 1971 to 2000 covering
well enough the period of liberalisation (that is, 199112). The Chow Breakpoint test was
used in addition to OLS to establish the effects of liberalisation.
The findings of the study revealed that the models were satisfactory and fulfilled
the objectives of the study. The models, despite their imperfections, were found to trace
the turning points at the time of liberalisation, indicating that it was valid. All the three
models estimated gave a reasonably good R2 and highly significant F-statistic. The
models also passed the diagnostic tests indicating the results to be representative of the
data used and the model to be valid. The results showed a significant impact of
liberalisation on government expenditure cm~ ta~ revenues but insignificant on fiscal ..~
deficits -
Based on these results, the study came up with the appropriate fiscal policy mix
that can be used in the liberalized era. The study also came up with the result that even
though the real fiscal deficits were at low levels, there was existence of macroeconomic
instability. Emphasis is therefore laid on effective fiscal policies guided by the
appropriate fiscal policy mix in collaboration with monetary policies to overcome this
situation.
Citation
Master of Arts in Economics.Sponsorhip
University of NairobiPublisher
Department of Economics, University of Nairobi,