Relationship between budget deficit and economic growth in Kenya
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Date
2013-10Author
Musyoka, Harrison M
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
It is important to determine the relationship between debt and economic growth
empirically in order to examine how debt contributes to economic growth, whether
positively or negatively, and the significance of its contribution. The widening budget
deficit in Kenya has also become a major concern because increasingly more debt is
needed to finance the government’s budget deficit should it continue to widen. Empirical
Studies have found mixed results on the nature of the relationship between budget deficit
and economic growth, this study seek to fill the existing research gap by answering the
following research question, what is relationship between budget deficit and economic
growth in Kenya? The study adopted a descriptive cross-sectional research design.
Secondary data from central bank for a 10-year period from where secondary data was
selected. Data was collected for the period starting from 2003 to 2012 from Central Bank
of Kenya. The data that was collected in the study was quantitative in nature. Regression
analysis was used to analyze the data and find out whether there exists a relationship
between budget deficit and economic growth in Kenya. In this research, a dynamic
econometric model was employed to assess the joint relationship between budget deficit
and economic growth in Kenya. From the findings budget deficit negatively affect the
economic growth in the country, as it was found from the regression and correlation
analsyis that there was a negative relationship between eceonomic growth and budget
deficit The study also concludes that gross investment in the country positively influence
the country economic growth as it was revealed that increase in gross investment
postively influence the country eceonomic growth . The study further revealed that
increase in inflation rate, exchange rate and interest rate, negatively influence the country
economic growth. Increases in inflation rate scare away investor as it reduces the
currency purchasing power thus decreasing the economic growth in the country
Citation
A Research Project Submitted In Partial Fulfillment Of The Requirement For The Award Of The Degree Of Master Of Business Administration School Of Business, University Of NairobiPublisher
University of Nairobi School of Business