Impacts of Remittance Inflows on Domestic Savings in Kenya

Abstract

Abstract The main objective of this study was to find out the impacts of remittance on domestic savings levels in Kenya for the period between 1970- 2011. Secondary data sourced from the World Bank database and Kenya National Bureau of Statistics was used. The Error Correction Model (ECM) was used. Empirical results show that GDP per capita, exports and investment affect domestic savings positively and significantly. Real interest rate does not have a significant effect on domestic savings. Remittance affects positively and significantly domestic savings positively. We therefore conclude that remittance inflows affect positively the rate of domestic savings. We therefore recommend, among others, that government's effort should be geared towards improving the inward flow of remittances by considering a favorable tax treatment for migrant investment in securities and offer the same tax treatment offered to foreign investors for certain classes of investment.