The Effect Of Foreign Direct Investment On Long Term Growth In Kenya Services And Agricultural Economic Sectors

Abstract

This paper examined the impact total FDI stocks have on the growth of Kenya’s services and agricultural sector. The study made used of time series data between 1980 and 2012. Augmented Dickey-Fuller test was used to test for stationarity and OLS and Dickey fuller tests were used to establish presence of cointegration. The relationship between FDI and sectoral growth was analyzed using OLS and analyzed using STATA software where data was presented in form of tables. The study findings were consistent with existing literature and theory concluding that FDI’s impact in the services industry is positive and insignificant while its impact on agriculture is indifferent. Factors responsible for growth of service sector established were FDI though insignificantly, growth of both manufacturing and agricultural sectors. Growth of agricultural sector was attributed to growth of exports though insignificantly and the growth of both service and manufacturing sectors. It was recommended that FDI be encouraged since it has a positive impact established although insignificantly. Growth of sectors is also encouraged as they impact positively to encourage FDI-led growth.