Asymmetrical Impact of Government Investment on Economic Growth in Kenya
Asymmetrical Impact of Government Investment on Economic Growth in Kenya

Summary/Abstract: This article investigates the disproportionate effect of government investment on economic growth in Kenya. This article employed a multivariate nonlinear autoregressive distributed lag model, covering the period 1980 to 2020. In contrast to similar past studies on the subject, this article tested a number of hypotheses to increase the reliability of the results. These tests comprise the Wald test for asymmetries, the Brock-Dechert-Scheinkman nonlinearity test, and the nonlinear autoregressive distributive lag bounds test for cointegration. The findings revealed evidence of an asymmetrical impact of government investment on economic growth in Kenya. A fall in government investment was followed by an economic downturn in the short run; however, the long-term impact was insignificant. The findings also indicate that, regardless of the timeframe considered, increases in government investment have no significant effect on economic growth. It was also established that gross domestic investment had a significant positive impact on economic growth, while inflation consistently had a negative impact. The goal of the current study is to add to our earlier research on Kenya’s inflation and economic growth. Thus, this current article is meant to strengthen public sector accountability procedures and promote responsible government financial and investment decisions in Kenya, all of which are crucial for a functional governance system. In order to encourage economic growth and place Kenya on its optimal growth trajectory, the paper urges Kenyan authorities to expand public sector investment in crucial utilities and infrastructure, including power production, healthcare, education and transportation, at least in the long run. In light of the detrimental effects that inflation has on the country’s development, lowering the amount of inflation can further boost economic growth.

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