The effect of capital flows on the Kenyan economy

Muthuuri, Njoki

The effect of capital flows on the Kenyan economy

Master Thesis

2014

Publisher

University of Cape Town

Department

Research of GSB

Faculty

Faculty of Commerce

Abstract

Foreign capital inflows (FCI) play an important role in the economic development of the recipient country as they fund investments and promote growth. However, the size and composition of such inflows are determined on the basis of country specific requirements. The study investigates the impact of capital inflows on the economy of Kenya at a time when the government implemented economic reform measures to stabilize the economy and restore sustainable growth. More specifically, the study examines the impact of foreign capital flows remittances such as overseas workers remittance, official development aid, and external debt, on selected macro-economic variables using monthly time series data and a single-equation empirical approach. The study findings reveal that some forms of FCI are not influenced by the macro economic variables in the country but by other factors such as political stability and policy variables.