Advanced Search
MyIDEAS: Login

Foreign Aid, Investment and Economic Growth in Kenya: a Time Series Approach

Contents:

Author Info

  • Daniel M'Amanja,
  • Oliver Morrissey
Registered author(s):

    Abstract

    Most of the literature on determinants of economic growth in developing countries is basedon cross-country analysis and thus only yields some patterns that hold on average. The aim of this paper is to identify aspects of the determinants of growth in Kenya, in particular if aid played a role. The empirical specifications used in cross-country work do not translate easily into country studies: many of the variables are not available annually or tend to change very slowly over time, and it is not feasible to include all potential determinants. Thus, we focus on one element of growth and use a multivariate approach on time series data for Kenya over the period 1964 – 2002 to investigate the growth effects of foreign aid, investment and a measure of international trade. Our econometric results reveal two long run relations representing the reduced form growth equation and the behavioural function of private investment. We find that shares of private and public investment, and imports in GDP have strong beneficial effects on per capita income in Kenya. However, aid in the form of net external loans is found to have a significant negative impact on long run growth. Private investment relates to government investment and imports negatively, but positively to foreign aid. The implication for policy is that in order for Kenya to foster and sustain growth, closer attention should be given to factors that promote private investment.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.nottingham.ac.uk/credit/documents/papers/06-05.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by University of Nottingham, CREDIT in its series Discussion Papers with number 06/05.

    as in new window
    Length:
    Date of creation:
    Date of revision:
    Handle: RePEc:not:notcre:06/05

    Contact details of provider:
    Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
    Phone: (44) 0115 951 5620
    Fax: (0115) 951 4159
    Web page: http://www.nottingham.ac.uk/economics/
    More information through EDIRC

    Related research

    Keywords:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank.
    2. Elsa V. Artadi & Xavier Sala-i-Martin, 2003. "The Economic Tragedy of the XXth Century: Growth in Africa," NBER Working Papers 9865, National Bureau of Economic Research, Inc.
    3. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244.
    4. Kenny, Charles & Williams, David, 2001. "What Do We Know About Economic Growth? Or, Why Don't We Know Very Much?," World Development, Elsevier, vol. 29(1), pages 1-22, January.
    5. Rodrik, Dani, 2003. "Growth Strategies," CEPR Discussion Papers 4100, C.E.P.R. Discussion Papers.
    6. Gernot Doppelhofer & Ronald I. Miller & Xavier Sala-i-Martin, 2000. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (Bace) Approach," OECD Economics Department Working Papers 266, OECD Publishing.
    7. Mosley, Paul & Hudson, John & Horrell, Sara, 1987. "Aid, the Public Sector and the Market in Less Developed Countries," Economic Journal, Royal Economic Society, vol. 97(387), pages 616-41, September.
    8. Harrison, Ann, 1996. "Openness and growth: A time-series, cross-country analysis for developing countries," Journal of Development Economics, Elsevier, vol. 48(2), pages 419-447, March.
    9. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    10. Bacha, Edmar L., 1990. "A three-gap model of foreign transfers and the GDP growth rate in developing countries," Journal of Development Economics, Elsevier, vol. 32(2), pages 279-296, April.
    11. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    12. Hansen, Henrik & Tarp, Finn, 2001. "Aid and growth regressions," Journal of Development Economics, Elsevier, vol. 64(2), pages 547-570, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:not:notcre:06/05. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Hilary Hughes).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.