Determinants of Private Investment and the Relationship Between Public and Private Investment in Kenya
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Date
2014-11Author
Birundi, Evans E
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
This study undertakes to analyse the determinants of private investment and establish the
relationship that exists between public investment and private investment in Kenya during the
period of 1971-2011. The study adopts the flexible accelerator model using the time series
data for the period in consideration. Variables in the model are real GDP, inflation, interest
rate, domestic credit, exchange rate, exports and external debt. The data for these variables
was collected from various sources including The Central Bank of Kenya, Economic
Surveys, Statistical Abstract and International Financial statistics. Using econometric
techniques such as unit root tests, co-integration and error correction model, the empirical
results show domestic credit, real gross domestic product and exports have positive impact on
private investment both in the long run and short run while exchange rate, external debt had
both short run and long run negative impact on private investment. Public investment had
only a short run negative impact while inflation had no any impact at all on private
investment. The research findings show that higher amount of domestic credit, rising gross
domestic product, more exports and low levels of total expenditure on public investment, less
external debt and moderate exchange rate will boast private investment in Kenya. This study
recommend the use of efficient and modern technologies in the manufacturing and
agricultural sector to increase their productivity, more domestic credit to the private sector,
debt relief among other policies are suggested to boost private investment in Kenya.
Publisher
University of Nairobi