Influence of macroeconomic determinants on economic growth in Kenya

Abstract

This study investigates the relationship between public debt, infrastructure development, human capital, political stability and Kenya’s economic growth from 1984 to 2024. The target population comprises annual macroeconomic records, with a census approach applied to the 25 available data points to ensure accuracy and avoid sampling error. Secondary time-series data was sourced from credible national and international databases, focusing on the GDP growth rate as the dependent variable. Data collection involved archival retrieval and transformation using natural logarithms to enhance comparability. Descriptive statistics and inferential techniques, including correlation, multiple regression, and multivariate time-series analysis, was employed and analysis was done using STAT version 17. The Vector Error Correction Model (VECM) guided the analysis, supported by diagnostic tests such as stationarity, co-integration, multi-collinearity, heteroscedasticity, and serial correlation. The study revealed that Public Debt-To-GDP Ratio (-0.608) negatively affects growth, while Infrastructure Development (0.450), Human Capital (0.164), and Political Stability (1.569) have positive but varying effects, though statistically insignificant. It concludes that Kenya’s growth depends on productive debt use, improved infrastructure, skilled human capital, and stable governance. The study recommends prudent debt management, equitable infrastructure investment, strengthened education and health systems, and sustained political stability to enhance growth. It further suggests expanding research to include additional macroeconomic variables, longer data periods, and comparative regional analyses. Future studies should also employ dynamic models and explore governance, innovation, and institutional quality as mediating factors influencing Kenya’s economic performance.