The impact of external debt on economic growth in Kenya

Abstract

This study investigates empirically the effect of the external debt burden on Kenya’s economic growth. Using regression analysis on secondary data obtained from WDI and relevant publications from Kenya on the same topic, the findings suggest that there is a positive correlation between GDP and External debt on time series data (19712012). The study used the Granger Engle 2 step procedure to obtain stationarity, Vector Error Correction Model to estimate short run impacts and ADF for Unit Roots. Using SAS and Stata, the study found that external debt had a negative impact on GDP growth and that debt overhung was present.