Effect of foreign direct investments on economic growth in Kenya

Abstract

This study sought to establish the effect of Foreign Direct Investments on economic growth in Kenya. The study adopted a descriptive cross-sectional research design, which according to Kothari (2004), is used when the problem has been defined specifically and where the researcher has certain issue to be described by the respondents about the problem. It aimed to explore the effect of FDI on economic growth in Kenya and the empirical evidences that help answer the research objective. The study sampled a period of 10 years starting from year 2003 to year 2012. Secondary data was collected from Central Bank of Kenya, Kenya investment Authority and Kenya National Bureau of statistics was used for analysis. The quantitative data collected was analyzed by the use of descriptive statistics and multiple regressions were used. The study found that exist a positive relationship between foreign direct investment and economic growth in Kenya, as it was revealed that a unit increase in foreign direct investment would lead to increase in countries economic growth. From the findings the study revealed that there was a positive relationship between countries total consumption with economic growth as it was revealed that a unit increase in total consumption would lead to increase in economic growth in Kenya. The study found that there exists a positive relationship between total saving of citizens and economic growth in Kenya, as it was revealed that a unit increase in total saving of citizens would lead to increase in economic growth in Kenya. From the findings the study revealed that there was a positive relationship between total fixed assets investment and economic growth as it was revealed that a unit increase in total fixed assets investment would lead to increase in economic growth in Kenya. The study recommends that there is need for the government to create incentives that aimed at increasing the flow of foreign direct investments in Kenya. The government should use various economic stimulus programs in order to boost the country gross domestic as this will positively influence foreign direct investment in various sectors.