Institutions and economic growth: Kenya, 1963 - 2014
This paper examines the existence of a relationship between political institutions and economic growth in Kenya. Through empirical analysis, carried out for the period between 1963-2014, the study aims to use the findings to improve and develop the policy in this area. The variables under scrutiny in this paper are GDP, political rights and civil liberties. Univariate and multivariate time series analysis are used to examine the relationship. The univariate time series helps to evaluate stationarity of the variables. The study finds that all three variables are non-stationary in the level unit root test. The multivariate time series examines the long run and short run relationships. The Engle-Granger test showed no cointegration between the variables. After subjecting the variables to a Johansen test, cointegration was found to exist indicating two cointegrating equations. This proves that indeed a long run relationship exists among the variables. Granger Causality tests reveal that political rights Granger Cause GDP at the 5% significance level. However, at the 10% level there was some significant causality from civil liberties to GDP and civil liberties to political rights.