Title: EFFECT OF REAL INTEREST RATE ON DOMESTIC PRIVATE
INVESTMENT IN KENYA
Authors: TORE KIPNGETICH NELSON AND ALFRED KEBO EMASE
TORE KIPNGETICH NELSON AND ALFRED KEBO EMASE Faculty of Arts and Humanities and Business Studies, Chuka University, Kenya
MLA 8 EMASE, TORE KIPNGETICH NELSON AND ALFRED KEBO. "EFFECT OF REAL INTEREST RATE ON DOMESTIC PRIVATE INVESTMENT IN KENYA." Int. j. of Social Science and Economic Research, vol. 3, no. 3, Mar. 2018, pp. 1018-1025, ijsser.org/more2018.php?id=72. Accessed 2018.
APA EMASE, T. (2018, March). EFFECT OF REAL INTEREST RATE ON DOMESTIC PRIVATE INVESTMENT IN KENYA. Int. j. of Social Science and Economic Research, 3(3), 1018-1025. Retrieved from ijsser.org/more2018.php?id=72
Chicago EMASE, TORE KIPNGETICH NELSON AND ALFRED KEBO. "EFFECT OF REAL INTEREST RATE ON DOMESTIC PRIVATE INVESTMENT IN KENYA." Int. j. of Social Science and Economic Research 3, no. 3 (March 2018), 1018-1025. Accessed , 2018. ijsser.org/more2018.php?id=72.
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Abstract: The government of Kenya has made efforts to promote investment through implementation of
policies aimed at attracting domestic private investment in the forms of infrastructural
development as well as promoting the investment environment. Several policies in Kenya have
been devised by the government in mobilization of domestic resources aimed at promoting
economic growth and development through investment. Despite this, domestic private
investment has been growing slowly over the years. Therefore, there was need to investigate the
major factors that have led to this slow growth in the general performance of domestic private
investment in Kenya. The main aim of this study was to analyze the effect of interest rate on
domestic private investment level in Kenya over the period between 1963 and 2014. The
investment model was modified to capture various factors relevant to Kenya in determining the
level of the growth of private domestic investment. The specific objectives of the study were
lending interest rate, real interest rate and deposit interest rates. The research design adopted for
the study was causal research design that helped in investigating the relationship between the
variables studied. Annual secondary time series data spanning from 1963 to 2014. Nonprobability
purposive sampling technique was employed to select the sample of 44 years' time
series data for the period 1971 to 2014. The Johansen co-integration was employed to establish
the relationship among variables. The data was analyzed using E-Views and PC-Give Ox-metrics
to present inferential statistics. The unit root test revealed that deposit interest rate , lending
interest rate and real exchange rate are I(1) while real interest rate and inflation rate are I(O).The
findings showed that deposit ,lending and real interest rates negated domestic private investment
in Kenya. The results of the study would be very important for policy formulation that would
help spur domestic private investment to promote and sustain long term economic growth. Data
results would also help policy makers to assess how private sector responds to government
The International Journal of Social Science and Economic Research Inviting Papers/Articles for Current Issue Volume 3 No. 6 June 2018.
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