Financial Development and Economic Growth in Kenya: Evidence from the Asymmetric Autoregressive Distributive Lag
Journal Title: Journal of Economics, Finance and Management Studies - Year 2021, Vol 4, Issue 05
Abstract
Appropriate changes in financial development are largely known to cause growth. Inflation, gross capital formation and government expenditure, believably, succinctly controls the effects and causes long term growth. This paper analyzed this effects for Kenya paying exceptional attention on their asymmetric effects. The most reliable and important results supported that positive asymmetries of financial development increases long run growth unlike the negative with reducing and weak effects. However, in case of financial dynamics and instabilities, economic growth responds negatively with a steep slump to shocks by declining financial development as positive gross capital formation shocks seems to plausibly control such nonlinear dynamics and positively causing growth. Also, sustainable inflation and prudent state expenditure spurs long term growth. Since this growthfinance relationship supports the supply-leading hypothesis, there is need for specific financial development policies which would alongside support sustainable inflation and prudent expenditure if they are to spur real growth. Moreover, the financial risk managers are required to robustly prepare against the negative shocks by finance that have greater degenerating effects than by upturn from the positive shock.
Authors and Affiliations
Consolata Wairimu Nderitu , Duncan O. Hongo
Keywords
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- EP ID EP695057
- DOI https://doi.org/10.47191/jefms/v4-i5-18
- Views 153
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