Theses and Dissertations
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Item Relationship between macroeconomic factors and the stock market development in Kenya(KCA University, 2025) Karanja, Grace N.Stock markets constitute an essential component of modern economic systems, serving as mechanisms for capital allocation, savings mobilization, and the promotion of economic development. They offer corporations a structured avenue to raise capital for expansion, enhance market liquidity, facilitate price discovery, and contribute to both the creation and distribution of wealth. In Kenya, the interplay between macroeconomic indicators and stock market development warrants comprehensive investigation, particularly in light of the growing significance of financial markets in the country’s economic architecture. This study sought to examine the relationship between selected macroeconomic variables specifically Gross Domestic Product (GDP) growth, inflation, interest rates, and exchange rates and their influence on the development of the Kenyan stock market. The investigation was anchored in prominent theoretical models such as the Efficient Market Hypothesis (EMH), Arbitrage Pricing Theory (APT), and the Three-Factor Model. These frameworks offered foundational perspectives for interpreting the interactions between economic fundamentals and financial market performance. Using a mixed-methods approach, the study combined quantitative analysis with time series data from 2000 to 2023 on a quarterly basis. The statistical analysis was conducted using STATA 12, employing a multiple linear regression model under the ordinary least squares (OLS) methodology to identify significant relationships among the variables of interest. Primary data sources included financial disclosures from listed firms on the Nairobi Securities Exchange (NSE), macroeconomic data from the Central Bank of Kenya and the Kenya National Bureau of Statistics, as well as exchange rate information obtained from the International Monetary Fund (IMF) and the World Bank. The analytical process commenced with a descriptive statistical assessment, encompassing measures such as the mean, variance, skewness, and kurtosis. Thereafter, diagnostic tests were conducted to ensure the fulfillment of OLS assumptions, including tests for stationarity, multicollinearity, and serial correlation. To capture both short-term dynamics and long-term equilibrium relationships, the study applied advanced econometric techniques, including Vector Error Correction Model (VECM), the Johansen Cointegration Test, and Granger Causality analysis. Furthermore, the Impulse Response Function (IRF) and Forecast Error Variance Decomposition (FEVD) were utilized to evaluate the dynamic temporal responses of the variables. The findings of the study yielded valuable insights for policymakers, investors, and financial analysts by elucidating the macroeconomic determinants of stock market performance in Kenya. The results also served to inform strategic financial decision-making, enhance risk management frameworks, and support the formulation of sound economic policies. Additionally, this study aimed to contribute to the broader academic discourse on financial market development within the context of emerging economies.Item Moderating Role of Foreign Direct Investment On The Relationship Between Macroeconomic Factors and Development Expenditure In Kenya(KCA University, 2026) Ondari, Eunice K.In Kenya, despite a projected GDP growth of 5.4% in 2025, up from 4.6% in 2024, the country faces challenges in effectively utilizing allocated development funds (KNBS, 2024). In the first half of the 2023/24 fiscal year, only 25.2% of the allocated development budget was absorbed by Ministries, Departments, and Agencies, indicating significant underutilization. This study aimed to identify trends, relationships, and potential causal effects between the variables by analyzing historical data over a period of time. The objective is to explore how fluctuations in interest rates, inflation, and exchange rates influence government development expenditure and the moderating role that FDI plays in this dynamic relationship. The development expenditure was measured in terms of government spending on infrastructure, education, healthcare, and other long-term development projects. The study was be guided by theories such as the Wagner's Law of Increasing State Activity, Keynesian Theory of Government Expenditure and Fiscal Illusion Theory, which examines how FDI impacts economic growth and development, and the Keynesian Theory, which highlights the importance of government expenditure in responding to macroeconomic challenges. The research adopted an exploratory study design where time series analysis was conducted to explain the significance of the relationship between the independent variables of the study on the dependent variables. The study concludes that interest rates have a negative and significant effect on development expenditure in Kenya. In addition, the study concludes that exchange rate fluctuations have a negative and significant effect on development expenditure in Kenya. Further, the study concludes that inflation rates have a negative and significant effect on development expenditure in Kenya. The study also concludes that Foreign Direct Investment has a negative and significant effect on the relationship between macroeconomic factors (interest rate, exchange rate, and inflation rate) and development expenditure in Kenya. Based on the findings the study the government of Kenya should strengthen inflation control measures through prudent fiscal discipline and effective monetary policies, so as to safeguard development expenditure. High inflation erodes the real value of allocated funds, leading to escalating project costs and delays in implementation. The study also recommends that that the government of Kenya should create a more stable and investor-friendly macroeconomic environment that aligns Foreign Direct Investment (FDI) with national development priorities.Item Effect Of External Debt And Inflation On Economic Growth In Kenya(KCA University, 2013) Osewe, Vincent.The state of economic growth in Kenya has been fluctuating over time as a result of various factors. This study was carried out using external debt and inflation rates as some of the variables which can impact economic growth. The purpose of this research was to investigate the effect of external public debt and inflation in Kenya. It also aimed at identifying other factors that can affect economic growth in Kenya. The specific objectives for the research were to determine the effect of external public debt level on economic growth in Kenya, analyze the effect of inflation on economic growth in Kenya and to establish whether external public debt level and inflation cause economic growth in Kenya. The methodology used during the research included secondary data from International Monetary Fund (IMF), International Financial Statistics (IFS) and Central Bank of Kenya (CBK) data. The study used econometric models in establishing the relationship among the variables. Johansen Cointegration test, Granger causality test and Vector Error Correction model were used using STATA statistical software. The research found that external debt and inflation had no impact on GDP and that there exists a cointegrating relationship among these variables hence they are moving together in long run. The test for granger causality indicated that there was no causal linkage among the variables.Item Effect Of Macroeconomic Factors On The Performance Of The Bond Market In Kenya(KCA University, 2018) Mugo, MwanikiA predictable and stable macro-economic environment leads to a robust bond markets in a country. The main objective of the study was to determine the effect of macroeconomic factors on the performance of the bond market in Kenya. Specifically, the study sought to determine the effect of foreign exchange rate on bond market performance in Kenya; to assess the effect of interest rate fluctuations on bond market performance in Kenya; and to investigate how inflation rate affects bond market performance in Kenya. This study adopted a longitudinal research design. The population in this study constituted the entire bond market in Kenya. The population of this study was drawn from quarterly bond market Index data for a period of 10 years from 2007 – 2017. Secondary data was collected for the study. The researcher obtained quarterly data for the variables. This study used descriptive and inferential statistics to analyze the data. Data analysis was done using STATAv13. Diagnostic tests were done to establish whether the model and variables are significant. The data was presented in form of tables. The long run regression results showed that the effect of macroeconomic factors on bond performance existed. The VECM findings showed that there was a short run relationship between the macroeconomic factors and bond performance. There was a negative effect of exchange rate and interest rate on bond performance. However, inflation rate displayed a positive relationship with bond performance in the short run. This study recommends that policies on exchange rate and interest rate be observed closely to control the variables as they affect bond performance negatively. The study also recommends a strict monetary policy and control of factors contributing to change in inflation rate in order to enhance bond performance. This study recommends further studies to be done using other macro-economic variables to understand their contribution to bond performance in Kenya.