رابطه علت و معلولی میان توسعه مالی و رشد اقتصادی در کنیا

This paper aims to reexamine the relationship between financial development and economic growth in Kenya over the period of 1971–2011. Since the financial sector plays a vital role in mobilizing and allocating savings into productive ventures, the core issue of this investigation remains important for developing economics. The examination is based on a Cobb–Douglas production augmented by incorporating financial development. A simulation based ARDL bounds testing and Gregory and Hansen's structural break cointegration approaches are being utilized in this study. Cointegration is being found between the series in the presence of a structural break in 1992. It is also being established that, in the long run, the development of the financial sector has a positive impact on economic growth. Here remains an important policy implication for the concerned individuals of Kenya, that is, they may emphasize on financial development to ignite economic growth.

The theoretical and empirical literature on the finance-growth nexus holds an inconclusive and ambiguous explanation about the relationship between the variables in question. The work of Schumpeter, (1934) revealed that financial sector development is an important determinant of economic growth. He argued that a sound and developed financial system can offer efficient services of financial intermediaries, which make it possible to transfer funds to the most innovative entrepreneurs. McKinnon, (1973) and Shaw, (1973) claimed that financial development has positive upshot on economic growth. Moreover, the empirical findings on this issue–in the horizon of developed and developing economies–pans out to be dissimilar. The empirical evidence unwrap that, financial development constitutes a potentially important mechanism for a long run economic growth.1 Hence, it is critical for a nation to verify, depending on the concerned context, whether financial development influences economic growth as an engine or not.

The relationship between financial development and economic growth within the frame of Kenya is being reinvestigated, using the Cobb–Douglas production function. This issue holds grave importance for a country like Kenya which is having a developing economy and where the role of the financial sector is believed to be a vital one for mobilizing and allocating savings into productive investments. A freshly developed simulation based ARDL bounds testing and Gregory and Hansen structural break cointegration are being implemented for testing the long run scenario, while using the ADF, PP and Zivot–Andrews structural break unit root tests the stationarity properties of the variables have been examined.