| dc.description.abstract | This study examined the impact of Treasury bond market development on economic
growth in Kenya. The finance growth nexus forms the basis of the research with the bond
market assumed to have a supply leading effect on economic growth. Most prior studies
on effect of capital markets on economic growth have ignored the bond markets focusing
only on stock market. Specifically studies focusing on the Kenya bond market are limited
yet it is now very vibrant and a key source of funding for government projects. Using
descriptive design the research focused on 14 year quarterly periods between 2001 and
2014. Correlation analysis and regression results were used to determine the impact of
bond market development variables, bond market size and bond market turnover on
economic growth variable, real GDP in Kenya. Control variables, government
expenditure, lending interest rates and USD to Ksh exchange rates were also introduced
to the model. The findings indicate that bond market development has a significant
positive effect on GDP in Kenya, lending support to the finance growth nexus. However,
when control variables are introduced, the two bond market variables become statistically
insignificant, an indicator of the extent to which the bond market is still under developed
and yet to significantly contribute to GDP compared to other determinants of economic
growth. The study recommends that the government should take policy initiatives to
foster growth of the Treasury bond market which is important in providing finance for
capital intensive infrastructure projects in order to achieve the Vision 2030 objectives. | en_US |
