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Government Capital Spending and Financing and its Impact on Private Investment in Kenya: 1964-2006

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  • Samuel O. Oyieke

    (University of Eastern Africa)

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.

Suggested Citation

  • Samuel O. Oyieke, 2011. "Government Capital Spending and Financing and its Impact on Private Investment in Kenya: 1964-2006," Working Papers 236, African Economic Research Consortium, Research Department.
    • Handle: RePEc:aer:wpaper:236
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    Cited by:

    1. Eslon Ngeendepi & Andrew Phiri, 2021. "Do FDI and Public Investment Crowd in/out Domestic Private Investment in the SADC Region?," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 19(1 (Spring), pages 3-25.
    2. William Irungu Nganga & Julien Chevallier & Simon Wagura Ndiritu, 2018. "Regime changes and fiscal sustainability in Kenya with comparative nonlinear Granger causalities across East-African countries," Working Papers halshs-01941226, HAL.
    3. Ephraim Ugwu & Johnson Okoh & Stella Mbah, 2017. "The Link Between Bank Credit And Private Sector Investment In Nigeria From 1980-2014," Oradea Journal of Business and Economics, University of Oradea, Faculty of Economics, vol. 2(1), pages 43-54, March.

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