Modelling the optimal growth- maximizing public debt threshold: A case for Kenya
Date
2021
Authors
Chakairu, Isabel Wamuyu-
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
This paper attempts to estimate the optimal growth -maximizing public debt
threshold for Kenya by assessing the relationship between public debt and
economic growth. The analysis determines the tipping point beyond which
Kenya's economic growth would be adversely affected. The paper thus
contributes to the debate in Kenya on whether the move by government to take
up huge bilateral and multilateral debt will in the long run be detrimental to the
economy. A bilateral quadratic equation is used to fit the non - linear relationship.
The results confirm existence of a concave relationship between public debt and
economic growth which is estimated to be optimal at around 45 to 50 percent for
Kenya.
The policy implication for the analysis· is the need to ensure that public debt
management policies are in line with the growth - maximizing public debt
threshold. This will ensure sustained economic growth and employment rates,
which are key tenets for sustainable economic development.
Description
Submitted in partial fulfillment of the requirements for the Degree of Bachelor of Business science in Financial Economics at Strathmore University