Effect of public debt and budget deficit on Kenya's economic growth

Table of Contents

Chapter One

INTRODUCTION

1.0 Introduction

1.1 Background

1.2 Problem statement

1.3 Purpose of the study

1.4 Objectives of the study

1.5 Research question

1.6 Significance of the study

1.7 Limitation of the study

1.8 Assumptions of the study

1.9 Scope of the Study

Chapter Two

Literature Review

2.1 Introduction

2.2 Theoretical literature review

2.3 Framework for the review

2.3.1 Keynesian theory

2.3.2 Ricardian Equivalence theory

2.3.3 Functional finance theory

2.3.4 The crowding-out theory

2.3.5 Tax smoothening theory

2.4 Insight from previous similar studies

2.4.1 Public debt and deficit facing definition

2.4.2 Public debts sustainability -definition and measurement

2.5 Definition of Terms

2.6 Empirical literature review

2.7 Summary of the literature

Chapter Three

Research Methodology

3.1 Introduction

3.2 Research Design

3.3 Location of the Study

3.4 Population of the Study

3.5 Sampling Procedure and Sample Size

3.6 Research Instrument

3.7 Data Collection

3.8 Ethical consideration

3.9 Data Analysis

3.10 Analytical Model

3.11 Estimation Techniques

3.11.1 Stationarity and Unit Root Test

3.11.2 Lag Order Selection

3.11.3 Co-integration Test

3.12 Diagnostic Tests

3.12.1 Multicollinearity Test

3.12.2 Autocorrelation Test

3.12.3 Heteroscedasticity Test

Chapter Four

Results and Discussion

4.1 Introduction

4.2 Descriptive statistics and test

4.2.1 Multicollinearity Test

4.3 INTERPRETATION

Chapter Five

Conclusion and Recommedation

5.1 Introduction

Research Objectives and Focus

This study investigates the long-term causal relationship between Kenya's public debt, budget deficits, and economic performance. It aims to determine how government borrowing impacts GDP growth and to assess the sustainability of current fiscal policies in the Kenyan context.

• The causal link between public debt and real GDP growth in Kenya.
• The impact of fiscal deficits on national economic output.
• Evaluation of debt sustainability within the framework of Kenyan fiscal policy.
• Application of quantitative time-series econometric models to analyze macroeconomic trends from 2001 to 2020.

Excerpt from the Book

Summary of Chapters

Chapter One: Provides the introduction, problem statement, and study objectives, framing the growing public debt as a central concern for Kenya's economic sustainability.

Chapter Two: Reviews key theoretical frameworks like the Keynesian and Crowding-out theories, alongside empirical literature regarding the impact of debt on economic performance.

Chapter Three: Details the research methodology, including the quantitative ex post facto design, time-series data collection from 2000-2021, and specific econometric estimation techniques.

Chapter Four: Presents the results and analysis of the collected data, utilizing descriptive statistics and diagnostic tests to interpret the relationship between the study variables.

Chapter Five: Concludes the study by summarizing findings on debt sustainability and offering policy recommendations for the Kenyan government.

Keywords

Public Debt, Budget Deficit, Economic Growth, GDP, Keynesian Theory, Fiscal Policy, Debt Sustainability, Time-Series Analysis, Econometrics, Tax Revenue, Kenya, Macroeconomics, Crowding-out Theory, Borrowing, Economic Performance.

Frequently Asked Questions

What is the core focus of this research project?

The project investigates the causal relationship between public debt and economic performance in Kenya, specifically examining how budget deficits influence GDP growth.

Which theoretical frameworks underpin this study?

The study is grounded in several theories, including the Keynesian theory, Ricardian Equivalence theory, Functional finance theory, The crowding-out theory, and Tax smoothening theory.

What is the primary objective of this study?

The main objective is to evaluate the relationship between budget deficits and economic growth in Kenya and to establish whether current debt levels are sustainable.

What research methodology was employed?

The researcher used a quantitative ex post facto design, utilizing secondary time-series data from 2001 to 2020 obtained from the IMF, Central Bank of Kenya, and other official sources.

What does the main body of the work cover?

The work covers literature reviews of relevant economic theories, detailed methodological procedures for data analysis, and an empirical investigation using regression models to interpret the data.

Which keywords define this research?

Key terms include Public Debt, Budget Deficit, Economic Growth, Fiscal Policy, Debt Sustainability, and Kenya.

What were the major findings concerning GDP growth?

The findings indicated a positive long-run causality between public debt and real GDP growth, suggesting that debt, when managed, can contribute to national economic performance.

How does the study address the problem of multicollinearity?

The study utilized VIF (Variance Inflation Factor) statistics to detect and monitor multicollinearity among the explanatory variables to ensure the validity of the regression results.