Impact of Foreign Direct Investment, Foreign Portfolio Investment and Diaspora Remittances on Kenya’s Economic Growth
Downloads
The Objective of this study is to find out the effect of capital flows on economic growth in Kenya, With Three specific objectives; To investigate the effect of foreign direct investment on economic growth in Kenya, to find out the effect of foreign portfolio investment on economic growth in Kenya, and to determine the effect of diaspora remittances on economic growth in Kenya. Quarterly data from 2002 to 2017 was used in the study, and Descriptive research design and inferential research design were used to analysis the data. Descriptively, mean and standard deviation were used and Inferentially the Auto regressive distribution Lag technique using the STATA software Version 15. Diagnostic tests were conducted on the data; Normality test using Jarque Bera test supported by the skewness and Kurtosis results; Unit root was tested using the Augmented Dickey Fuller Test .The Auto Regressive Distributed Lag regression short run results show that, foreign direct investment had an positive and insignificant effect on gross domestic product, whereas foreign portfolio investment had a positive and statistically significant short run effect on gross domestic product at 1% level of significance and diaspora remittances had a positive and very significant effect of gross domestic product at 5% level of significance. The Error Correction Model regression results showed that in the long run, Foreign Direct Investment, Foreign Portfolio Investment, and Diaspora Remittances had a positive and very significant effect on the economic growth at 1% level of significance.
Adeniyi, O., Omisakin, O., Egwaikhide, F.O. & Oyinlola, A. (2012).Foreign direct investment, economic growth and financial sector development in small open developingeconomies.Economic Analysis and Policy, 42(1), 105-128.
Aizenman, J., Jinjarak, Y., Park, D. (2011). Capital flows and economic growth in the era of financial integration and crisis, 1990–2010. National Bureau of Economic Research, 24(3), 371-396. doi: 10.1007/s11079-012-9247-3.
Ahamada, I. and Coulibaly, D. (2013). Remittances and growth is Sub Saharan African Countries. Journal of International Development, 25(1), 310-324.
Babbie, E. (2007). The basics of social research. Belmont, CA: Wadsworth/Thomson Learning.
Blair, H. (2003). Capital-Account Liberalization, the cost of capital and economic growth. American Economic Review, 93(2), 91-96.
Bett, L. (2011). Effect of remittances on economic growth of Kenya.
Chowdhury, A. & Marrotas, G. (2005).Foreign direct investment and growth: A causal relationship. World Institute for Development Economics Research, Research Paper No. 2005/25.
Edwards, S. (2004).Financial openness, sudden stops and the current account reversal. American Economic Review, 94, 59-64.
Evans, M. D., & Hnatkovska, V. (2007). Financial Integration, Macroeconomic Volatility and Welfare. Journal of the European Economic Association, 5(2-3), 500–508.
Fayissa B. and Nsiah C. (2010). The impact of remittances on economic growth and Development in Africa. The American Economist, 55(2), 92-103
Kula, F. (2003). Effectiveness of international capital movements: Observations on Turkey. Journal of Faculty of Economics and Administrative Sciences, 4 (2), 141-154.
Levine, R., & Zervos, S. (1996). Stock market development and long-run growth. The World Bank Economic Review, 10(2), 323–339
Levine, R. and Carkovic, M. (2002) .Does foreign direct investments accelerate economic growth? SSRN Electric Journal.doi: 10.2139/ssrn.314924.
Mosiuri M. (2012). The relationship between foreign direct investment and economic growth in Kenya.
Mugenda O. N & Mugenda A.G. (2012).Research methods dictionary. Nairobi: Applied research and training services.
Pradhan,G., Upadhyay, M. & Upadhyay, K. (2010). Remittances and economic growth in developing countries. European Journal of Development Research, 20(3), 497– 506.
Singh, R.J., Haacker, M., Lee, K. and Goff, M.L. (2010).Determinant and macroeconomic impact of remittances in Sub-Saharan Africa. Journal of African Economies, 20(2), 312- 340
Tokunbo S., Lloyd A. (2010).Foreign private investment and economic growth in Nigeria.Review of Economic and Business Studies.3 (1), 105-127.
