Modeling Kenyan Economic Impact of Corona Virus in Kenya Using Discrete-Time Markov Chains

Abstract

Since the outbreak of pandemic COVID-19 (Corona virus), many countries have continued to suffer economically leading to massive losses in terms of trillions of dollars globally in terms of trade loses. In reaction to this effect, many countries in the world have taken emergency measures to ensure that the impact does not lead to huge economic and financial implications in terms of rapid recession. In Africa, where many countries have taken measures to deal with global recession to the citizens especially through fiscal and monetary policies, which includes Kenya. In addition, the social economic statues have continued to change instantaneously and stochastically more so after huge number of populations losing their daily informal jobs with new measures to stop the spread of COVID-19 virus. This paper seeks to model the effect of COVID-19 pandemic on Kenyan Gross Domestic Product (GDP) contributors using a Discrete-time Markov Chain Analysis. In addition, the paper seeks to find the ultimate effect of the Covid-19 to the top five key sectors of the Kenyan economy that contributes massively to GDP growth by looking at the proportion of the contributors at steady state. Moreover, the results from this paper should help the government of Kenya as well as global investors to understand different economic stimulus planning packages to launch in the “hard-hit” sectors of the economy to reduce the impact of the potential economic recession. Ultimately, the information should be help in formulating a post COVID-19 economic recovery plan for the Kenyan economy but also act as a benchmark strategy for many other countries in Africa that has economic and financial dynamics similar to that of Kenya.