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Government size and economic growth in Kenya: a multivariate dynamic causal linkage

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  • Sheilla Nyasha
  • Nicholas M. Odhiambo

Abstract

This study empirically examines the dynamic causal relationship between government size and economic growth in Kenya during the 1970-2017 period using the autoregressive distributed lag (ARDL) bounds testing approach. A multivariate Granger-causality model was used in order to reduce the omission-of-variable bias, which has been found to be associated with bivariate Granger-causality models. For this purpose, the study used domestic investment and trade openness as intermittent variables between government size (proxied by government final consumption expenditure) and economic growth. The results of the study are consistent with the Keynesian view as they reveal that, in Kenya, there is a distinct unidirectional causal flow from government size to economic growth - both in the short run and in the long run. This shows that, in Kenya, government expenditure Granger-causes real sector growth. Based on these results, policy makers in Kenya are recommended to pay special attention to the national government size when implementing growth-enhancing policies.

Suggested Citation

  • Sheilla Nyasha & Nicholas M. Odhiambo, 2021. "Government size and economic growth in Kenya: a multivariate dynamic causal linkage," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 13(2), pages 150-165.
    • Handle: RePEc:ids:ijsuse:v:13:y:2021:i:2:p:150-165
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    Citations

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    Cited by:

    1. Sheilla Nyasha & Nicholas M. Odhiambo & Mercy T. Musakwa, 2021. "The Impact of Stock Market Development on Unemployment: Empirical Evidence from South Africa," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 71(1-2), pages 92-110, January-J.
    2. Talknice Saungweme & Nicholas M. Odhiambo, 2021. "Inflation and Economic Growth in Kenya: An Empirical Examination," Advances in Decision Sciences, Asia University, Taiwan, vol. 25(3), pages 1-25, September.
    3. Talknice Saungweme & Nicholas M. Odhiambo, 2021. "Inflation and Economic Growth in Kenya: An Empirical Examination," Advances in Decision Sciences, Asia University, Taiwan, vol. 25(3), pages 1-25, September.
    4. Talknice Saungweme & Nicholas M. Odhiambo, "undated". "Inflation And Economic Growth In Kenya: An Empirical Examination," Working Papers AESRI04, African Economic and Social Research Institute (AESRI).

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