Abstract
Kenya's GDP growth is hampered by high fiscal deficits, high interest rates, and volatile exchange rates. As a result, the economy has experienced sluggish cycles of low economic growth, prompting policymakers to revise their policies. Kenya's ability to address macroeconomic instability hinges on its ability to increase economic growth. Divergent perspectives on the relationship between selected macroeconomic variables and economic growth is revealed by additional evidence. The goal of this research was to see how certain macroeconomic drivers affected economic growth. The study was based on the theory of endogenous growth. The study, which was based on the philosophical paradigm of positivism, used an explanatory research design and secondary data from the Kenya Bureau of Statistics, which covered the years 1990 to 2020. In the empirical analysis, the study used the bound test to test for a long-run relationship and the Autoregressive Distributed Lag model (ARDL) to evaluate the relationship between the variables. The data was tested for stationarity using the Augmented Dickey Fuller method. The long run ARDL results showed that the coefficients of exchange rate 0.080 (p-value 0.033 < 0.05), lending interest rate -0.172 (p-value 0.011 < 0.05), and broad money supply 0.242 (p-value 0.001 < 0.05) all had a significant impact on economic growth. The results of this study will be useful in forming fiscal and monetary policy, as well as in informing the government about potential solutions to economic growth challenges. According to the study, CBK policymakers should pursue policies that ensure exchange rate stability, determine effective lending interest rates, and keep the fiscal deficit in line with Kenya's economic growth.
Highlights
TO THE STUDY In today's world, especially in developing countries, economic growth is a major concern
The long run Autoregressive Distributed Lag model (ARDL) results showed that the coefficients of exchange rate 0.080 (p-value 0.033
The findings show that there is a significant negative relationship between fiscal deficit and economic growth in the long run, between 1950 and 2007, and that the two sets of variables are co-integrated
Summary
TO THE STUDY In today's world, especially in developing countries, economic growth is a major concern. Every sovereign nation's goal is to improve its citizens' living standards by encouraging economic growth and development (Ismaila et al, 2015). The Sustainable Development Goals (SDGs), known as the Global Goals, were adopted by all United Nations Members in 2015 as a universal call to action to end poverty, protect the environment, and ensure that all people live in peace and prosperity, according to Vision 2030. In this regard, economic growth is seen as the most important goal for reducing poverty and fostering hope for societal improvement (Ketema, 2006).
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