Government Capital Spending and Financing and its Impact on Private Investment in Kenya: 1964-2006
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Date
2011-08
Authors
. Oyieke, Samuel O
Journal Title
Journal ISSN
Volume Title
Publisher
AERC
Abstract
This paper examines the relationship between public investment and its financing
on private investment in Kenya for the period 1964-2006. Using an error correction
framework and time series data for the fiscal years 1964-2006, the study shows that
investment in agriculture has a significant positive effect on private investment, while
domestic debt has a significant negative effect. Political risk, real exchange rate, external
debt, and tax though negatively related are insignificant. Investment in infrastructure has
an insignificant positive effect. These findings have important policy implications that
investment in agriculture crowds-in private investment. To encourage private investment,
the government should channel increased resources to the agricultural sector. Domestic
debt crowds-out private investment, thus the government should reduce its dependence
on domestic borrowing to finance budget deficit.
Description
HC 865 . Z9 P836 2011
Keywords
Expenditures -Public , Investments- Kenya , Investments , tax and debt financing , private investment , error correction