EFFECT OF EXTERNAL DEBT LIABILITY ON ECONOMIC GROWTH IN KENYA

Purpose: The purpose of the study was to evaluate the effect of external debt liability on economic growth in Kenya. Materials and Methods: The descriptive research design was adopted. The target population was three institutions: The National Treasury, Kenya National Bureau of Statistics, and the World Bank. The study used time series data. The designated sample for this study covered a period of 43 years (1977–2019). Secondary data was used in this study. The data collected was on GDP of Kenya between 1977 and 2019, External public debt in terms of US dollars from 1977 to 2019, External private debt from 1977 and 2019 and external debt service payments from 1977 to 2019, all in US dollars. A data collection sheet was used to collect the data on the four variables. World Bank and World Development Indicator economic Meta data and published data by Central Bank of Kenya and the Kenya National Bureau of Statistics were the source of data for this study. The study used Eviews version 10 for analyzing and presenting study findings. The study employed multivariate time series and panel data regression analysis. The model employed GDP as a measure of economic growth and external public debt, external private debt, and external debt service payment as its main independent variables. Results: The study found out that only the external private debt and the debt service payment showed bilateral causal relationship. External public debt and external private debt had a positive and significant effect on the GDP, indicating that external debt promotes economic growth in Kenya. The external debt service payment showed a negative and a significant effect on the GDP as well. The model explained 97% variability of the GDP as explained by the three independent variables combined. The 3% is attributed to other factors, not included in this study. Unique contribution to theory, practice and policy: The study recommends a more robust multivariate model to be employed to include more macro-economic variables to explain economic growth. A decade-to-decade comparison can also be done to compare the effects of the external debt on Kenyan economic growth in different time intervals. Fiscal and monetary policies should be reviewed to encourage more domestic and foreign investments and discourage external borrowing to fund budget deficits or projects with low or no returns.

TOURISM-LED GROWTH HYPOTHESIS AND ECONOMIC GROWTH IN KENYA

Purpose: The purpose of this study was to analyze tourism-led growth hypothesis in Kenya’s economy. Materials and Methods: The descriptive research design was adopted. This study targeted international tourism receipts, employment, economies of scale and capital investments in tourism related economic activities that included hotels and food service activities, wholesale and retail trade, transport and information communication and travel agencies, entertainment and recreation in the period 1980 to 2019.The study used purposive sampling. a sample size of data for 40 years from 1980 to 2019 was used. The data were collected from KNBS, the World Bank and WTTC using a secondary data collection sheet. Using real GDP per capita as the dependent variable and international tourism receipts, tourism related employment, economies of scale and capital investments as the independent variables, the study used regression and vector error correction (VEC) to carry out the analysis. The analysis was systematic and begins with diagnostic tests that included Breusch-Godfrey Serial Correlation LM test, Breusch-Pagan-Godfrey test for homoscedasticity, Jarque-Bera normality test, VIF multi-collinearity test, Augmented Dickey Fuller unit root test and Johansen Co-integration test and finally the regression and the vector error correction analysis. Data analysis was done using E-views software. Results: The study results showed that international tourism receipts, tourism related employment and economies of scale positively influence real GDP per capita in both short run and long run equilibrium. Capital investments negatively affected real GDP per capita in the long run but had a positive effect in the short run equilibrium. Granger causality test presented a bi-directional causality between international tourism receipts, tourism related employment, economies of scale and capital investments and real GDP per capita. Unique contribution to theory, practice and policy: The country should enact policies that promote tourism related activities because the benefits derived from tourist expenditures positively influence the growth of the economy. Institutions such as Brand Kenya, Tourism Promotion Council, the Ministry of Tourism and recruitment of international tourism ambassadors should be strengthened to ensure more foreign tourists are attracted into the country.

THE LATENT CONTENT MODEL OF ECONOMIC GROWTH

Purpose: This paper aimed to establish a latent content (LC) model of economic growth that integrates both economic and non-economic variables. Methodology: The study used a cross-sectional survey research design. The checklist questionnaires were used to collect primary data. The sample size of the study was 2011 individuals, randomly sampled from Mwanza and Kagera regions in Tanzania. Cronbach’Alpha and principal component analysis (PCA) were used to test reliability and validity of questionnaires respectively. The study used both linear and non-linear modelling data analytics methods to examine assumptions of the LC model of economic growth. Clearly, the study used automatic linear modelling, stochastic structural-factor frontier analysis, and structural equation modelling to test the linearity assumption of the LC model. Moreover, the probit model and neural network analysis were used to examine the non- linearity assumption of the LC model. Findings: The study evidenced that the LC model was significantly determined by capital, psychological well-being (PWB), and labour. However, the labour was found significant negatively impacts economic growth. The subjective well-being (SWB) indicators were found insignificantly impacting the economic growth, however they have indirect impacts. Furthermore, the study confirmed that non-economic variables had less probabilistic power than economic variables. The paper concluded that an optimal economic growth (GDP) was direct related to capital, psychological wellbeing and inversely proportional to labour. However, the effectiveness of capital and labour were due to mediation effects of subjective well-being and psychological well-being respectively. Unique contribution to theory, practice and policy: The LC model of economic growth introduces a modern theory of economic growth, that its adoption will affect the traditional economic theories, practices and policy settings. The model was found empirically valid, hence, the paper recommended the adoption of the LC model in pre-and post micro and macro-economic policy and strategy designs/planning. The adoption of the model will increase the probability of an individual of getting a high economic growth (output) as well as the strengthening of psychosocial resources. However, this study suggested further study by using longitudinal data to attest the LC model as the current study only limited on the cross-sectional data.

THE MOTIVATIONAL EFFECT OF OIL EXPLORATION IN SOMALI AND THE HABITUAL AFRICAN RESOURCE CURSE

Purpose: The abundance of natural resources is usually considered the blessing for the countries that own such resources. However, such wealth is often associated with poverty and a slower economic growth. This phenomenon is called the resource curse, and it shows that most countries that are rich in natural resources have markedly reduced economic growth and development, and it shows that the wealth of natural resources adversely affects their economies, although it is intuitively expected to be the opposite i.e. that such wealth would have a positive impact on the country’s economic development. The general objective of the study was to find out the motivational effect of oil exploration in Somali and the habitual African resource curse. Methodology: The paper used a desk study review methodology where relevant empirical literature was reviewed to identify main themes and to extract knowledge gaps. Findings: The study found out that Oil resource exploration has led to progress in some developed economies such as Canada which was able to avoid the resource curse. This is because oil revenues helped Canada among other countries make investments in capital, build employment and grow. Other countries such as Russia and Japan have not been able to avoid the resource curse. African countries in general where the majority of oil producing nations are, have an inverse correlation between oil production and industrial development. Examples of African countries that have been affected by the resource curse are Nigeria, Angola, South Africa and Zimbabwe. Empirical results indicate that, Somalia motivation for oil exploration is for economic development. However, it has not been spared the resource curse because the presence of oil has led to civil wars and terrorisms as groups seek to control the areas with oil fields. In addition, Somali and Kenya have involved diplomatic warfare over oil reserves that are located in the Indian Ocean near their borders. Recommendations: The study recommends that the government should enact laws which will govern petroleum operations, as well as empowering the Somali Petroleum Authority,(SPA) which will act as a regulatory body overseeing oil and gas activity.