Open AccessTriple Deficits and Economic Growth in Kenya
Author(s) -
Sandra Macharia,
Tabitha Nasieku
Publication year - 2021
Publication title -
account and financial management journal
Language(s) - English
Resource type - Journals
ISSN - 2456-3374
DOI - 10.47191/afmj/v6i10.05
Subject(s) - distributed lag , economics , kenya , growth theory , cointegration , error correction model , macroeconomics , short run , growth model , monetary economics , development economics , econometrics , classical economics , political science , law
The objective of this study was to determine the effect of triple deficits on economic growth in Kenya. The specific objectives of the study were: to establish the effect of budget deficits, current account deficits and savings investments deficits on economic growth in Kenya. Persistent deficits have been of great concern because of the internal and external vulnerabilities they pose to the Kenyan economy. The study was based on the Keynesian theory, Thirlwall’s theory, and endogenous growth model theory. Annual data ranging from the year 1990 to 2018 was used. The autoregressive distributed lag (ARDL) and error correction model (ECM) were used to establish the significance and impact of the variables on economic growth in Kenya in the short and long run. The research established that budget deficits had a significant effect on economic growth in the long run while current account deficits had a significant effect on economic growth in the short run. The study recommends adoption of macroeconomic policies that aim at reducing budget and current account deficits and encourage greater discipline to ensure optimal use of funds into productive sectors.