Countries with a high investment GDP ratio benefit from better, competitive
products and services. Which increases capital stock for production, more
employment, and income; in turn reducing social and income disparities. The
Kenyan government envisaged a sustained economic growth of 10% by investing
in priority sectors; to become an industrialized middle-income country by the year
2030; though un-achieved to date. To examine the nexus between internal
investments and economic growth, the study used annual time-series observations
from the years 1996 to 2017; where internal investments are from the government;
private domestic; and public-private partnership; and exogenous variables were
rates of real interest; social discount; commercial lending interest; and the country
risk premium on lending for investment decisions. The inference used stationarity;
cointegration; significance; causality; variance decomposition of forecast error; and
impulse response function. Stationarity tests suited the ARDL model which also
supports small size observations. Findings were; a significant and positive influence
on economic growth from lags of real GDP, government, private domestic, except
public-private partnership investments. Anticipation for growth lies with;
significant pairwise causality (real GDP with public investment); significant block
exogeneity (public investment); endogeneity (real GDP), and exogeneity (public
investment) influence; and short-run private domestic investment recovery.
Keywords: ARDL, Economic Growth, Public Investment, Private Domestic
Investment, Public-Private Partnership Investment, Investment Decisions.
The Nexus Between Internal Investment and Economic Growth in Kenya
