School of Business and Economics

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Browsing School of Business and Economics by Author "Chesang, Laban K."

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    Export Intensity and Total Factor Productivity in Kenya‟s Manufacturing Sector
    (International Journal of Economics and Finance, 2024) Kimolo, Dorothy Ngina; Njaramba, Jennifer; Chesang, Laban K.
    Kenya has adopted an export-led manufacturing industrialization strategy as envisaged by many policy documents including the Kenya Vision 2030 which aimed at increasing the manufacturing share in Gross Domestic Product to 15 per cent by 2022. The share of manufactured exports in all exports was targeted at 60 per cent by 2022 as per the National Exports Development and Promotion Strategy. However, manufacturing sector‟s productivity has been declining as demonstrated by its economic contribution which has averaged around 10 per cent from 2007 to 2022 and has persistently declined from 12.79 per cent in 2007 to 7.83 per cent in 2022 pointing towards premature deindustrialization. Besides, from 2007 to 2022, the share of total exports made up of manufactured goods averaged 33 per cent. The study aimed to estimate firms‟ total factor productivity (TFP) and examine the impact of export activity on firms‟ TFP in Kenya‟s manufacturing industry. Firm TFP was computed utilizing the Levinsohn and Petrin (2003) technique. The study employed Propensity Score Matching and a dynamic panel model estimated using the generalized methods of moments technique, to analyze the effect of exporting on firms TFP. Export intensity, labor productivity and management experience had positive effects on firm‟s TFP. However, firm size and capital intensity had negative effects on TFP. Based on the study findings, the government should emphasize on export promotion policies as well as adoption of labor intensive technologies in Kenya‟s manufacturing sector.
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    Firm-Level Determinants of Export Performance in Kenya’s Manufacturing Sector
    (International Journal of Economics, 2024) Kimolo, Dorothy Ngina; Njaramba, Jennifer; Chesang, Laban K.
    Purpose: This study aimed at investigating the firmlevel determinants of export performance (export propensity and export intensity) in Kenya’s manufacturing sector using firm-level panel data obtained from the World Bank Enterprise Surveys for the periods 2007, 2013 and 2018. Methodology: The study adopted a quantitative nonexperimental research design. The Heckman TwoStage estimation procedure was employed to jointly establish the firm-level determinants of export propensity and export intensity in Kenya’s manufacturing sector. Findings: Based on the estimation results, firm-level total factor productivity, firm size, human capital, cost of material, electricity cost and foreign ownership had positive and significant effects on firms’ export propensity while labor productivity negatively influenced export propensity. Firm age, capital intensity and research did not have significant effects on export propensity. On the other hand, export intensity was positively influenced by firm-level total factor productivity, foreign ownership, firm size, firm age, human capital and research. Labor productivity had a negative effect on firms’ export intensity. Whereas the effect of energy cost on export intensity was weakly significant at 10 percent level of significance, there was no significant effect of cost of material on export intensity. Unique Contribution to Theory, Practice and Policy: Employing the new ‘new’ trade theory, the study tested the self-selection hypothesis by analyzing the determinants of export propensity and intensity. According to the self-selection hypothesis, one of the key positive determinants of export propensity and export intensity is firm-level total factor productivity. The study findings validated the self-selection hypothesis since the results revealed firm-level total factor productivity as a positive and significant determinant of both export propensity and export intensity for Kenya’s manufacturing firms. According to the study's conclusions, the government and enterprises must focus on policies that increase firm level total factor productivity, firm size, human capital, and research in order to improve firms' export performance.
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    The Long-Run Relationship between Inflation and Real Stock Prices: Empirical Evidence from South Africa
    (Journal of Business Economics and Management, 2012) Arjoon, Riona; Botes, Mariëtte; Chesang, Laban K.; Gupta, Rangan
    The existing literature on the theoretical relationship between the rate of inflation and real stock prices in an economy has shown varied predictions about the long run effects of inflation on real stock prices. In this paper, we present some time series evidence on this issue using South African data, by applying the structural bivariate vector autoregressive (VAR) methodology proposed by King and Watson (1997). Our empirical results provide considerable support of the view that, in the long run real stock prices are invariant to permanent changes in the rate of inflation. The impulse responses reveal a positive real stock price response to a permanent inflation shock in the long run, indicating that any deviations in short run real stock prices will be corrected towards the long run value. It is therefore concluded that inflation does not lower the real value of stocks in South Africa, at least in the long run.
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    Parameter Uncertainty and Inflation Dynamics in a Model with Asymmetric Central Bank Preferences
    (Economic Modelling, 2016) Chesang, Laban K.; Naraidoo, Ruthira
    This paper exploits the Lucas’ (1973) signal extraction model to study the effect of uncertainty in the outputinflation trade-off on inflation, using a monetary model with asymmetric central bank preferences over inflation and output. We show that the implication of the uncertainty is two-fold: firstly, it causes the interaction of output and volatility of monetary policy to influence inflation movements so that, higher volatility in monetary policy causes inflation to rise. Secondly, as suggested in an optimal rule, it causes output to contract by less whenever inflation increases above the target, and to expand by less whenever inflation is below the target. We also find that the Reserve Bank’s asymmetric aversion to inflation stabilization explains inflation movements significantly, and that the monetary authority seems to penalize more for inflationary rather than deflationary pressures. Overall, the Bank’s deflationary bias would allow for a relatively flat output-inflation trade-off, which could be helpful for economic stability.