Money and physical capital are complementary in kenya

Nicholas Odhiambo

International Economic Journal, 2004, vol. 18, issue 1, 65-78

Abstract: In this paper, two models have been used to test the relevance of McKinnon's complementarity hypothesis in Kenya. In the first model, the demand for money has been included in the savings function and, simultaneously, the savings rate has been included in the real money balances function. In the second model, the investment variable has been included in the money demand function. Contrary to the results obtained from some previous studies, the paper finds strong support for McKinnon's complementarity hypothesis in both models. 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). The paper therefore concludes that money and physical capital are complementary in Kenya.

Keywords: JEL Classification: E2; H5; Kenya; money; physical capital; Johanssen-Juselius Coitegration Model (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (2)

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DOI: 10.1080/1351161042000180647

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