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Public Policy and Administration


Dr. Ernesto Escobedo


Kenya’s public debt has grown rapidly, precipitating debate on its impact on economic performance and causing public anxiety. The purpose of this quantitative ex post facto study was to investigate the long run and causal relationship between Kenya’s public debt and economic growth. Keynesian theory, Ricardian equivalence theory, and neoclassical theory provided the framework for the study. Research Questions 1 and 2 addressed the causal relationship between public debt and select covariates as independent variables and real gross domestic product (GDP) growth rate as the dependent variable. Research Question 3 addressed the relationship between primary budget balance and public debt. Archival data were analyzed using the vector error correction model and autoregressive distributed lag methods. Findings showed a positive long-run causality between public debt and real GDP growth. The relationship between primary budget balance and public debt was positive and statistically significant, demonstrating that Kenya’s debt is sustainable. Findings may be used to promote adoption of fiscal policies that increase economic growth, savings, investments, job creation, and living standards of Kenyans.

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