n African Finance Journal - Assessing the finance-growth channel in Kenya : a VAR analysis
|Article Title||Assessing the finance-growth channel in Kenya : a VAR analysis|
|© Publisher:||AfricaGrowth Institute|
|Journal||African Finance Journal|
|Affiliations||1 Kenyatta University, Kenya|
|Publication Date||Jan 2013|
|Pages||66 - 84|
|Keyword(s)||E44 and O16|
The government of Kenya is implementing strategies that will deepen the financial sector with the aim of propelling economic growth. However analytical and empirical evidence shows that in Kenya, financial deepening does not cause economic growth as expected. This paper seeks to establish the points of disconnect in the finance-growth transmission channel. Using the VAR approach, the analysis reveals that enhanced financial deepening leads to increased interest rates. Increased interest rates in turn lead to increased savings mobilization. However, these savings do not influence capital formation. Moreover, capital formation does not lead to enhanced economic growth.
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