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Dynamic Impacts of Changes in Government Spending on Economic Growth in Kenya: A Structural VAR Analysis

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  • Mahrous, Walaa

Abstract

Relationship between government spending and economic growth is still indecisive in both theory and empirical studies. Since its independence in 1963, the Kenyan government has been expanding its expenditure to achieve high levels of economic growth and development. However, this goal has witnessed many upward and downward trends. This paper aims at examining the dynamic effects of government expenditure on economic activity (GDP) in Kenya. The paper applies a Structural Vector Auto Regression (SVAR) model and uses quarterly data set between 1991 and 2012 to estimate the Kenyan government expenditure multiplier. Results have shown that the effect of government spending on output in Kenya appears to be weak and nonpersistent. These results are justified by high government debt to GDP ratio, high debt servicing, and high marginal propensity to import in Kenya.

Suggested Citation

  • Mahrous, Walaa, 2016. "Dynamic Impacts of Changes in Government Spending on Economic Growth in Kenya: A Structural VAR Analysis," MPRA Paper 79270, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:79270
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    References listed on IDEAS

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    4. Olivier Blanchard & Roberto Perotti, 2002. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1329-1368.
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    More about this item

    Keywords

    Government Spending; Economic Growth; SVAR Model.;
    All these keywords.

    JEL classification:

    • H0 - Public Economics - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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