| dc.description.abstract | This study undertakes to examine private investment in Kenya. Its major
objectives are geared towards the factors that determine private investment.
The study was based on data drawn from National Accounts, aid and trade
statistics for the country. These sources provided annual observations for the
period 1970-2003. The factors that affect private investment were broadly
investigated through socio-economic explanatory variables.
The factors that featured in the study include; savings, income, aid,
consessional loans, foreign exchange availability, interest rates, output price
and the variability of returns to investment.
A specified simple model was estimated in logs by OLS method. Stationarity
of the variables was investigated using Durbin Watson statistic and the
augmented Dickey Fuller Statistic. Where data was non-stationary,
cointegration of the variables was investigated by Engle - Granger and
Johannsen's Procedure.
The study found out that domestic funds, aid and concessional loans do affect
the growth of investment, but these are not the only factors. Variables
reflecting the rate of return to investment are also important. That the
demand - side factors are significant suggests that some investors are able to
borrow on international capital markets. In particular, the rate of growth of
investment can be impaired by an increase in the variability of capital goods
prices.
The study gives some recommendations to be adopted in the face of declining
private investment in the country, which include among others, review of the
banking act, reduction of government borrowing from the domestic market
and increased government investment on physical infrastructure. | en |
