The effect of budget deficit on economic growth in Kenya
Abstract
Over the past few decades, budget deficits have gained a great deal of scrutiny. This is
because most of the challenges facing developing countries have been blamed on it.
The study looked at budget deficit link to economic growth in Kenya. The study
covered the period 2001 to 2019. CBK publications was the study source of data. The
research design used was descriptive and data was analyzed applying the linear model.
Budget deficit was the major independent variable and the control variables were;
exchange rate, inflation rate and interest rate. Results findings showed that budget
deficit and economic growth were positively linked. The strength of the relationship
was established to be insignificant. Interest rate, inflation rate and exchange rate
association to economic growth was established to be negative. The strength of the
relationship for all of the control variables was however non-statistically significant.
The adjusted R2 for the regression was found to be 29.3 %. This implied that, the
independent variable explained only 29.4 % of the changes in the dependent variable
while 70.7% of the changes was explained by non-study variables. The model was also
found to be fit at 5% significance level. The study recommends that monetary
authorities should therefore develop and enforce interest rate policies and inflation rate
policies that increase investment and take into account other elements that hinder the
progression of investment.
Publisher
UoN
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
- School of Economics [237]
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