EFFECT OF FINANCIAL DEVELOPMENT ON ECONOMIC GROWTH IN KENYA: EVIDENCE FROM TIME SERIES ANALYSIS
Journal Title: European Journal of Business and Social Sciences - Year 2015, Vol 3, Issue 11
Abstract
This paper examines the relationship between financial development and economic growth in Kenya using annual time series data. The analysis techniques employed in this study was autoregressive distributed lag (ARDL). This approach was useful in handling small sample size like in this study and to address the problem of endogeneity since the relationship between financial development and economic growth cannot be determined on a priori grounds. The results revealed that financial development exerts a positive and statistically significant effect on economic growth in Kenya hence confirming supply leading hypothesis. This was confirmed both in the short-run as well as in the long-run regression results. From policy perspective the policy makers need to formulate financial sector reform policies to ensure a well-functioning financial system that promotes domestic credit especially to productive sectors of the economy.
Authors and Affiliations
Mercy J. Kiprop| Department of Economics, Egerton University, 536 Njoro, Kenya. Egerton University, Kenya, Aquilars Kalio| Department of Economics, Egerton University, 536 Njoro, Kenya. Egerton University, Kenya, Lawrence kibet| Department of Economics, Egerton University, 536 Njoro, Kenya. Egerton University, Kenya, Symon Kiprop| Department of Economics, Egerton University, 536 Njoro, Kenya. Egerton University, Kenya
Keywords
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