| dc.description.abstract | Kenya has been dependent on ODA since its independence in 1963. The significant amount of
ODA has been coupled with substantial private resource flows and other loans. ODA is expected
to bring forth economic growth, reduce poverty and better living standard. However, the
effectiveness of ODA in promoting growth has received much attention from researchers but
there is still no solid consensus on whether ODA spurs economic growth. Inspired by the
refutable empirical results on aid-growth relationship, dismal economic performance, and the
limitations of the country specific studies; this study examined the impact of ODA on economic
growth in Kenya.
The study applied VECM estimation technique and time series data for the period 1970-2012 to
investigate the ODA-Growth relationship. Solow growth model was used to establish a link
between theory and empirics. The findings from the study show a long run causality running
from ODA, private external resource flows, gross domestic capital formation, final government
consumption expenditure, trade openness, broad money, and inflation; to GDP growth per
capita. While ODA seems to contribute to economic growth in the short run, its effect is not
statistically significant. A statistically significant negative effect in the short run of private
external resource flows and trade openness was established. The results also suggest that
previous year’s GDP growth per capita, gross domestic capital formation, and broad money (as
a measure of financial depth) are the important factors that stimulated economic growth over
the study period in the short run. It could be concluded that Kenya should focus on internal
factors to induce economic growth rather than depending on external factors especially in the
short run. | en_US |
