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Title: SELECTED MACROECONOMIC VARIABLES AND THEIR IMPACT ON THE FINANCIAL PERFORMANCE OF THE MANUFACTURING SECTOR IN KENYA
Authors: MARGARET NYARUIRU MUGURE
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MARGARET NYARUIRU MUGURE Assistant lecturer chuka university, Kenya
MLA 8 MUGURE, MARGARET NYARUIRU. "SELECTED MACROECONOMIC VARIABLES AND THEIR IMPACT ON THE FINANCIAL PERFORMANCE OF THE MANUFACTURING SECTOR IN KENYA." Int. j. of Social Science and Economic Research, vol. 6, no. 6, June 2021, pp. 1938-1975, doi.org/10.46609/IJSSER.2021.v06i06.023. Accessed June 2021. APA 6 MUGURE, M. (2021, June). SELECTED MACROECONOMIC VARIABLES AND THEIR IMPACT ON THE FINANCIAL PERFORMANCE OF THE MANUFACTURING SECTOR IN KENYA. Int. j. of Social Science and Economic Research, 6(6), 1938-1975. Retrieved from doi.org/10.46609/IJSSER.2021.v06i06.023 Chicago MUGURE, MARGARET NYARUIRU. "SELECTED MACROECONOMIC VARIABLES AND THEIR IMPACT ON THE FINANCIAL PERFORMANCE OF THE MANUFACTURING SECTOR IN KENYA." Int. j. of Social Science and Economic Research 6, no. 6 (June 2021), 1938-1975. Accessed June, 2021. doi.org/10.46609/IJSSER.2021.v06i06.023.
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Abstract: Manufacturing sector plays an important role in any economy through its contribution to GDP, foreign exchange and employment creation. However, the growth rate of the sector in Kenya is still slow due to various challenges that it faces. The government of Kenya has made efforts to promote production in the sector by investing in heavy machines that are used in production, reduction of corporate tax to encourage more investment, creation of industrial parks among other initiatives. Despite the government effort the growth of the sector has been stagnating. Therefore, there was need to investigate the factors that have led to the slow and stagnant growth rate of the sector. The purpose of this study was to investigate how the impact of selected macroeconomic variables on the financial performance of the manufacturing sector. Particularly the study sought to determine the impact of interest rate, inflation rate and GDP on the financial performance of the manufacturing sector. The study adopted causal research design which helped in investigating the effects of each of these variables on the financial performance of the sector. The target population was all manufacturing industries that are listed in the Nairobi Stock Exchange under manufacturing and allied. Secondary data was obtained from World Bank. Purposive sampling technique was used to select a sample of 36 years from 1980 to 2016. The data was analyzed using SPSS version 20, Eviews, Pc Give ox metrics and STATA softwares to present inferential statistics. The analysis involved descriptive statistics, unit root test, correlation, granger causality and vector error correction model. The test t-statistics used were statistics and f-statistics. The analysis was carried out and interpreted at 5% significance level. The study found out that there was a significant relationship between interest rate, inflation rate, GDP and the financial performance of the manufacturing sector because the p-value was 0.000 < 0.05 for all the variables. R2 indicated that 54.87% of the variation in the financial performance of the sector was caused by interest rate, inflation rate and GDP fluctuation. The study recommended that the Central Bank of Kenya should formulate policies to stabilize macroeconomic variables. The results of this study will be useful in policy making which will improve the financial performance of the sector and accelerate economic growth and development

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