|
Putunoi Godfrey Kampan Studies in the realm of public debt in developing countries traditionally focused on external debt. However, in recent years, several developing countries, including Kenya, began adopting aggressive policies aimed at retiring public external debt and substituting it with domestically issued debt. This has since created another problem – the problem of a high and growing domestic debt. This study investigates the effect of domestic debt on economic growth in Kenya. The issue is examined empirically using the Ordinary Least Squares (OLS) regression technique on quarterly time series data from 2000 to 2010. The Jacque Bera (JB) and Augmented Dickey-Fuller (ADF) tests have been used for the tests of normality and unit roots respectively.
The long run relationship between the variables is investigated using the two step Engel-Granger cointegration test. The study shows that domestic debt expansion in Kenya, for the period of study, has a positive and significant effect on economic growth with the regression coefficient of domestic debt at 0.14187 and statistically significant at 5% level. In view of this, the study recommends that the Kenyan government encourages domestic borrowing provided the funds are utilized properly. |
|
Last Updated on Wednesday, 23 November 2011 21:34 |
Academic Programs 
