stdClass Object ( [id] => 7943 [paper_index] => EW201809-01-002520 [title] => CAUSALITY BETWEEN REAL INTEREST RATE AND GROSS CAPITAL FORMATION IN KENYA: THE HICKSIAN HYPOTHESIS [description] =>
  1. Central Bank of Kenya. (2018). The impact of interest rate capping on the Kenyan economy- Draft. Nairobi: Central bank of Kenya.
  2. Jhinghan, M. (2003). (2003) Advanced Economic Theory (Micro and Macro) 12th Edition . New Delhi: VrindaPublications.
  3. Khurshid, A. (2015). Th e eff ect of interest rate on investment;Empirical evidence of Jiangsu Province, China. Journal of International Studies, 8(1), 81-90.
  4. Kiley, M., & Roberts, J. (2017). Monetary Policy in a Low interest rate world. Brookings Papers on Economic Activity, Spring, 317-396.
  5. Malawi, A., & Bader, M. (2010). The Impact of Interest Rate on Investment in Jordan:A Cointegration Analysis. Journal of Economics & Administration24(1), 199-209.
  6. Mauro, B. (2003). The IS-LM Model and the Liquidity Trap Concept: From Hicks to Krugman. The History of Political Economy Conference (pp. 1-46). Brazil: Duke University.
  7. Meng, Q., & Yip, C. (2004). Investment, interest rate rules, and equilibrium determinacy. . Economic Theory,23, 863-878.
  8. Obamuyi, T. (2009). An investigation of the relationship between interest rates and economic growth in Nigeria, 1970 - 2006. Journal of Economics and International Finance.1(4), 093-098.
  9. Odondo J. A (2017): The Link between Food Import and Cereals Production in Kenya: Evidence from Cointegration and Granger Causality Analysis Using Time Series    Data, Journal of Economics and Sustainable Development, 8 (10), 40-48
  10. Mukras M. S., Odondo J. A., Momanyi G & Bosire E. K. (2014): Determinants of Sweet     Potatoes (Ipomoea Batatas L) Profitability In Rachuonyo South District, Kenya, A      peer reviewed paper Published in the International Journal of Managerial Studies   and Research (IJMSR), Vol. 2(4):48-60
  11. Pavelescu, F. (2008). Gross capital formation and economic Growth during early 2000's in EU member and candidates state. JEL, 1-12.
  12. Trading Economics. (2018). trading economics. Retrieved May 21, 2018, from Gross capital formation percent of gdp: https://tradingeconomics.com/kenya/gross-capital-formation-percent-of-gdp-wb-data.html
  13. Ugochukwu, S., & Chinyere, U. (2013). The Impact of Capital Formation on the Growth of Nigerian Economy. Research Journal of Finance and Accounting, 36-45.
[author] => Ochieng Otieno Benjack [googlescholar] => https://scholar.google.co.in/citations?user=KeqZGcIAAAAJ&hl=en [doi] => [year] => 2018 [month] => September [volume] => 6 [issue] => 9 [file] => eprapub/EW201809-01-002520.pdf [abstract] =>

In 2016, the Government of Kenyan introduced interest rate cap of 14% per annum to spar investments through cheaper credit acquisition from commercial banks. This objective was not realized as evidenced by deteriorating levels of investments as reported by the Central Bank of Kenya (CBK) in 2017. In response to this incongruity, causal relationship between Real Interest Rate (RIR) and Gross Capital Formation (GCF) together with the relevance of Hicksian Hypothesis was tested in Kenya. Correlational research design was adopted and World Bank Time series data from 1980 to 2017 was used. Long run causality was tested using Vector error correction model (VECM) and revealed a long run causality with the speed of adjustment towards equilibrium = -1.696590 at p =0.0061. Wald test pointed to the existence of short run causality between the two variables. The study found a bi directional causality between RIR and GCF in the short and long-run periods. Consequently, investments decisions in Kenya closely follow the Hicksian hypothesis. Although bidirectional causality was established, a weak negative association existed between the two variables, suggesting the existence of other factors which determine GCF in Kenya given the outlined incongruity.  Hence, the two variables should be jointly considered together with other GCF determinants during policy formulation in order to enhance investment activities in the economy.

KEY WORDS: Granger Causality, Real Interest Rate and Gross Capital Formation

[keywords] => [doj] => [hit] => 1580 [status] => [award_status] => P [orderr] => 4 [journal_id] => 4 [googlesearch_link] => [edit_on] => [is_status] => 1 [journalname] => EPRA International Journal of Economic and Business Review(JEBR) [short_code] => IJES [eissn] => 2347-9671 (O), 2349-0187(P) [pissn] => [home_page_wrapper] => images/products_image/12.JEBR.png ) Error fetching PDF file.