The impact of inflation and unemployment on economic growth in Kenya

Abstract

The main objectives of this study include; to detennine the feedback effects between inflation, unemployment, and the growth of the economy in Kenya and to detennine whether there is a long-run relationship between inflation, unemployment, and growth in the economy in Kenya. The target population for this study is the performance of inflation and unemployment in Kenya from the year .1960 to 2019. Population of this data is annual secondary data from the World Bank. The study adopted unit root test to test for stationarity whereby some variables were stationary at first difference and others at second difference. The Johansen cointegration test suggests that there are two co integrating equations in this model. Vector Enor Con·ection Model is used to estimate the short run and long effects. According to the results, GDP per capita growth does not seem to have a direct long mn relationship with unemployment and neither does unemployment have a direct long mn relationship with GDP per capita growth. The impulse response graphs display the main macroeconomic variables in the study i.e.:inflation, GDP per capita growth and unemployment response to a positive shock