Can consumer debt burden adequately explain slowdowns in Kenya’s economic growth?

Abstract

This study set to examine the relationship between consumer debt burden and economic growth. The prior specification was that consumer debt burden causes a slowdown in economic growth. The analysis makes use of Kenyan time series data from 1970 to 2019. Analysis of the data was done by means of a Vector Error Correction Model (VECM) and tested how consumer debt burden explains economic growth through a third variable (consumption & agriculture) which are the main drivers of Kenya's economy and also included a control variable; net exports. The results indicate a negative causal relationship between consumer debt burden and economic growth which means that rises in consumer debt burden cause economic slowdowns.