Interest rate reforms, financial deepening and economic growth in Kenya:an empirical investigation
Nicholas Odhiambo ()
Journal of Developing Areas, 2009, vol. 43, issue 1, 295-313
This paper examines the impact of interest rate reforms on financial deepening and economic growth in Kenya, using two models: the financial deepening model and the dynamic Granger causality model. The study attempts to answer two critical questions: Does interest rate liberalization in Kenya have any positive influence on financial deepening? Does the financial depth which results from interest rate liberalization lead to economic growth? Using cointegration and error-correction models, the study finds strong support for the positive impact of interest rate liberalization on financial deepening in Kenya - although the strength and clarity of its efficacy is sensitive to the level of the dependency ratio. The study also finds financial depth to Granger cause economic growth in Kenya. The study, therefore, concludes that the interest rate liberalization in Kenya has succeeded in increasing economic growth through its influence on financial depth. This applies irrespective of whether the models are estimated in a static long-run formulation (cointegration model) or in the dynamic formulation (error-correction model).
Keywords: Africa; Kenya; interest rate liberalization; financial deepening; economic growth (search for similar items in EconPapers)
JEL-codes: G20 E40 D90 C22 (search for similar items in EconPapers)
References: Add references at CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:jda:journl:vol.43:year:2009:issue1:pp:295-313
Access Statistics for this article
More articles in Journal of Developing Areas from Tennessee State University, College of Business Contact information at EDIRC.
Bibliographic data for series maintained by Abu N.M. Wahid ().