Economic Growth, Electricity Access, and Remittances in Kenya

Susan M Onuonga

doi:10.18639/merj.2020.1100554

Abstract

This paper investigated the long-run relationship between gross domestic product, access to electricity, and remittances within the multivariate framework in Kenya using the data for the period 1987-2018. The autoregressive distributed lag (ARDL) bounds test was used to investigate the long-run relationship. Causality between variables was investigated by use of the Granger causality method. The bounds test indicated that there is cointegration when gross domestic product, electricity access, and remittances are dependent variables. The long-run estimation of coefficients suggests that electricity access and remittances have significant positive impact on economic growth in Kenya in the sample period. Causality analysis provides evidence that there is unidirectional Granger causality running from gross domestic product to electricity access and not vice versa and from gross domestic product to remittances and not vice versa. There was no causality between remittances and electricity access. The policy implications of the paper suggest that the government and other companies concerned should enhance electricity access and encourage inflows of remittances as these contribute positively to economic growth in Kenya.

Highlights

Energy plays a major role in the economic development of a country
The results indicate that if electricity access increases by 1%, economic growth will increase by about 0.34%
Granger causality results confirm that economic growth has positive impact on electricity access and attracts more foreign remittances

Summary

Introduction

Energy plays a major role in the economic development of a country It is one of the key factors for production. It is an essential commodity for most human activities, such as serving as source of fuel for transport, source of light, and power for household appliances and industrial production. All these make energy play a crucial role in the socioeconomic development of the country. Electricity, a component of energy, is one of the renewable and clean energies, with minimal negative health impacts It is a major factor in economic development of the country and very important in achieving the Millennium Development Goals. Without access to modern energy, the country will be pushed further to poverty (Attigah and Mayer-Tasch, 2013)

Objectives

Results

Conclusion