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Research Article Open access CC BY 4.0

Foreign Direct Inflows and Economic Growth Nexus in Kenya: Co-integration and Causality Analysis

Mutuku Cyrus, Koech Elias

Journal of Economics, Management and Trade · pp. 161–171 · Published 17 Dec 2014

10.9734/BJEMT/2015/8612

Abstract

The study focused on the co-integration and causality analysis between FDI and GDP for Kenya using annual data spanning 1970 t0 2013. It was established that though the two variables are I(1), they are co-integrated. The VECM framework revealed that FDI has a significant influences GDP both in the long run and short run. A unidirectional causality was established from FDI to GDP, while impulse response functions revealed that a shock in any of the two variables significantly affects each other for a period of one year. The study concludes that FDI enhancing policies would be necessary for economic growth in Kenya.  

FDI inflows economic growth multivariate granger causality VAR VECM

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