The microeconomic effects of trade liberalization in Kenya
Abstract
The objective of this study is to determine what effect
trade liberalization has had on the economic growth rate, the
balance of trade and employment in Kenya. The study is motivated
by the lack of theoretical and empirical consensus on the
macroeconomic effects of trade liberalization in developing
countries and by the absence of adequate empirical analysis on
this issue in the case of Kenya. The importance of this study
lies in its role in evaluating existing trade policy in Kenya and
in prescribing preferable policies for the future.
The major components of trade liberalization programs
namely: reductions in quantitative restrictions tariff rate
reductions, tariff rationalization and exchange rate changes, are
used to construct a direct measure of Kenya's trade policy for
the period 1963 1990. This measure is then related to the
target macroeconomic variables using econometric as well
econometric techniques.
One of the findings of the study is that
liberalization has impacted negatively on 'the economic growth
rate. This is partly attributed to another finding
that trade liberalization has not significantly increased exports as
expected. However, the study finds that trade liberalization does
not adversely affect; the balance of trade and also finds no
significant effect of trade liberalization on employment.
The emergent.policy implication from the findings is the
crucial need for supportive policies to accompany trade liberalization particularly policies to ensure that the export
sector can respond to the incentives offered by trade
liberalization packages.
Citation
Masters thesis University of Nairobi (1993)Publisher
Department of Economics