The Egg or the Chick First; Saving or GDP Growth: Case for Kenya
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Date
2008
Authors
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Journal ISSN
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Publisher
KCA Journal of Business Management.
Abstract
This paper adopts the Hendry Model with a two-step method to model a saving function for Kenya. The Model uses a complex dynamic specification that includes lagged dependent and the independent variables. The paper finds that a 1% increase in GDP growth rate leads to a 0.5% increase in private saving in the long run which is consistent with the life cycle hypothesis. A striking result in the saving function is the positive effect that population growth rate seems to have on private savings which puts into question the notion of a smaller population as a mobilization tool for private saving. Even though consumption seems to have a significant negative effect on private savings in the short run, in the long run, it does not seem to have any significant effect. Causality tests support a uni-directional causality from per capita GDP to private saving and a bi-directional causality between Gross Domestic Saving and Investment.
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Keywords
Hendry Model, GDP growth, Kenya, Saving function, Gross Domestic Saving, Investment
Citation
Waithima, A. (2008) Egg or the Chick first; Saving or GDP Growth: Case for Kenya. KCA Journal of Business Management. 1(1) https://www.ajol.info/index.php/kjbm/article/view/43817