IDEAS home Printed from https://ideas.repec.org/a/ibn/ijefaa/v10y2018i1p129-139.html
   My bibliography  Save this article

Moderating Effect of Political Risk on the Relationship between Capital Expenditure and Sectoral Economic Growth in Kenya

Author

Listed:
  • Brenda Molonko
  • Samuel Nathaniel Ampah

Abstract

The study sought to determine the effect of capital expenditure on Sectoral economic growth and the moderating effect of political risk on the relationship using Auto Regressive Distributed Lag model. The study targeted 11 sectors that receive government expenditure and adopted positivist philosophy and a causal research design. Secondary data for the period 2006-2015 was collected from Kenya National Bureau of Statistics Statistical Abstracts, Kenya National Audit Office reports and Political Risk Group reports. The study conducted Hausman Test, Panel Stationarity Test and Heterogeneity Test as preliminary tests. The study found that capital expenditure has a significant effect on Sectoral economic growth both in the long run and short run. The study further found that political risk has a significant moderating effect on the relationship between capital expenditure and Sectoral economic growth in the long run at the significance level of 0.05. The study concluded that capital expenditure has an effect on sectoral economic growth in Kenya both instantaneously and in the long run. As well, Political risk curbs the effect of capital expenditure in the long run. The study recommends enhancement of capital expenditure. Additionally, the government should enhance political stability to accelerate growth.

Suggested Citation

  • Brenda Molonko & Samuel Nathaniel Ampah, 2018. "Moderating Effect of Political Risk on the Relationship between Capital Expenditure and Sectoral Economic Growth in Kenya," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(1), pages 129-139, January.
  • Handle: RePEc:ibn:ijefaa:v:10:y:2018:i:1:p:129-139
    as

    Download full text from publisher

    File URL: http://ccsenet.org/journal/index.php/ijef/article/view/72363/39601
    Download Restriction: no

    File URL: http://ccsenet.org/journal/index.php/ijef/article/view/72363
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Joakim Westerlund, 2007. "Testing for Error Correction in Panel Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(6), pages 709-748, December.
    2. Musoni J. Rutayisire, 2015. "Threshold Effects in the Relationship between Inflation and Economic Growth: Evidence from Rwanda," Working Papers 293, African Economic Research Consortium, Research Department.
    3. Mr. Saad A. Alshahrani & Mr. Ali J Al-Sadiq, 2014. "Economic Growth and Government Spending in Saudi Arabia: an Empirical Investigation," IMF Working Papers 2014/003, International Monetary Fund.
    4. Edame Greg Ekpung, 2014. "Trends Analysis of Public Expenditure on Infrastructure and Economic Growth in Nigeria," International Journal of Asian Social Science, Asian Economic and Social Society, vol. 4(4), pages 480-491.
    5. Ranjan Kumar Dash & Chandan Sharma, 2008. "Government Expenditure and Economic Growth: Evidence from India," The IUP Journal of Public Finance, IUP Publications, vol. 0(3), pages 60-69, August.
    6. Gradstein, Mark, 2002. "Governance and Growth," CEPR Discussion Papers 3270, C.E.P.R. Discussion Papers.
    7. Pedro Martins, 2011. "Aid Absorption and Spending in Africa: A Panel Cointegration Approach," Journal of Development Studies, Taylor & Francis Journals, vol. 47(12), pages 1925-1953.
    8. Nicholas Odhiambo, 2015. "Government Expenditure and Economic Growth in South Africa: an Empirical Investigation," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 43(3), pages 393-406, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. R.A.Susantha Kumara Ranasinghe & Ichihashi Masaru, 2014. "The Composition of Government Expenditure and Economic Growth : The Case of Sri Lanka," IDEC DP2 Series 4-7, Hiroshima University, Graduate School for International Development and Cooperation (IDEC).
    2. Vishal Jaunky, 2013. "Democracy and economic growth in Sub-Saharan Africa: a panel data approach," Empirical Economics, Springer, vol. 45(2), pages 987-1008, October.
    3. A Alodadi & J Benhin, 2015. "Long Term Economic Growth in Oil-Rich Saudi Arabia: What is the role for non-oil sectors?," Economic Issues Journal Articles, Economic Issues, vol. 20(1), pages 109-130, March.
    4. Omoshoro-Jones, Oyeyinka Sunday, 2016. "A Cointegration and Causality Test on Government Expenditure –Economic Growth Nexus: Empirical Evidence from a South African Province," MPRA Paper 102085, University Library of Munich, Germany, revised 17 Oct 2017.
    5. Herwartz, Helmut & Reimers, Hans-Eggert, 2006. "Modelling the Fisher hypothesis: World wide evidence," Economics Working Papers 2006-04, Christian-Albrechts-University of Kiel, Department of Economics.
    6. Bilal Mehmood & Syed Hassan Raza & Mahwish Rana & Huma Sohaib & Muhammad Azhar Khan, 2014. "Triangular Relationship between Energy Consumption, Price Index and National Income in Asian Countries: A Pooled Mean Group Approach in Presence of Structural Breaks," International Journal of Energy Economics and Policy, Econjournals, vol. 4(4), pages 610-620.
    7. Vassilis Monastiriotis & Cigdem Borke Tunali, 2020. "The Sustainability of External Imbalances in the European Periphery," Open Economies Review, Springer, vol. 31(2), pages 273-294, April.
    8. Hyunsoo Kang, 2022. "Impacts of Income Inequality and Economic Growth on CO 2 Emissions: Comparing the Gini Coefficient and the Top Income Share in OECD Countries," Energies, MDPI, vol. 15(19), pages 1-15, September.
    9. Azariadis, Costas & Stachurski, John, 2005. "Poverty Traps," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 5, Elsevier.
    10. Karaman Örsal, Deniz Dilan & Droge, Bernd, 2014. "Panel cointegration testing in the presence of a time trend," Computational Statistics & Data Analysis, Elsevier, vol. 76(C), pages 377-390.
    11. Huy Quang Doan, 2019. "Trade, Institutional Quality and Income: Empirical Evidence for Sub-Saharan Africa," Economies, MDPI, vol. 7(2), pages 1-23, May.
    12. Nicholas M. Odhiambo & Talknice Saungweme, "undated". "Does International Tourism Spur International Trade In Ssa Countries? A Dynamic Panel Data Analysis," Working Papers AESRI07, African Economic and Social Research Institute (AESRI).
    13. jean georges innocent magloire TAPE & Kouamé Jean-Marc N'DRI, 2023. "Gestion du risque opérationnel et performance des banques en zone UEMOA," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 14(2), pages 128-141, December.
    14. Ksenija DumiÄ ić & Josip Mikulić & Anita ÄŒeh ÄŒasni, 2017. "Tourism spending behaviour before and after the 2008 financial crisis," Tourism Economics, , vol. 23(1), pages 223-228, February.
    15. Lin, Boqiang & Okoye, Jude O., 2023. "Towards renewable energy generation and low greenhouse gas emission in high-income countries: Performance of financial development and governance," Renewable Energy, Elsevier, vol. 215(C).
    16. Dongwon Lee & Yu-chin Chen, 2014. "What Makes a Commodity Currency?," Working Papers 201420, University of California at Riverside, Department of Economics.
    17. Mehmet Balcilar & Daberechi Chikezie Ekwueme & Hakki Ciftci, 2023. "Assessing the Effects of Natural Resource Extraction on Carbon Emissions and Energy Consumption in Sub-Saharan Africa: A STIRPAT Model Approach," Sustainability, MDPI, vol. 15(12), pages 1-23, June.
    18. Ciarlone, Alessio, 2011. "Housing wealth effect in emerging economies," Emerging Markets Review, Elsevier, vol. 12(4), pages 399-417.
    19. Ehigiamusoe, Kizito Uyi & Lean, Hooi Hooi & Smyth, Russell, 2020. "The moderating role of energy consumption in the carbon emissions-income nexus in middle-income countries," Applied Energy, Elsevier, vol. 261(C).
    20. Tao Kong, 2011. "Governance Quality and Economic Growth," ANU Working Papers in Economics and Econometrics 2011-537, Australian National University, College of Business and Economics, School of Economics.

    More about this item

    Keywords

    political risk; sectoral economic growth; capital expenditure;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ibn:ijefaa:v:10:y:2018:i:1:p:129-139. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Canadian Center of Science and Education (email available below). General contact details of provider: https://edirc.repec.org/data/cepflch.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.