CHAPTER ONE: INTRODUCTION
1.1 Background of the study 2
1.2 Statement of the Problem 3
1.3 General Objective of the Study 5
1.3.1 Specific Objectives of the Study 5
1.4 Research Hypotheses 5
1.5 Significance of the Study 6
1.6 Scope of the study 6
1.7 Limitation of the study 7
1.8 Assumption of the Study 7
CHAPTER TWO; LITERATURE REVIEW 8
2.1 introduction 8
2.2 overview of independent variable 9
2.3 overview of dependent variables 10
2.4 empirical literature review 11
2.4.1 lending interest rates and domestic 12
2.4.2 objective 2 13
2.4.3 objective 3 14
2.5 theoretical literature 15
2.6 conceptual framework 16
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction
3.2 Research design
,3.3 Location of the study
3.4 Population of the study
3.5 Sampling Procedures and Sample Size
3.6 Research Instrument
3.7 Data Collection
3.8 Ethical Considerations
3.9 Data Analysis
3.9.1 Analytical Model
3.10 Estimation Techniques
3.10.1 Stationarity and Unit Ratio Test
3.10.2 Granger Causality Test
3.11 Diagnostic tests
3.11.1 Multicollinearity Test
3.11.2 Heteroscedasticity Test.
3.11.3 Normality Test
3.11.4 Autocorrelation
3.12 Data Analysis Matrix
CHAPTER 4: RESULTS AND DISCUSSION
4.1 introduction
4.2 descriptive statistics and normality test
4.3 diagnostic tests
4.3.1 multicollinearity test
4.3.2 heteroscedastic test
,4.3.3 autocorrelation
4.4 stationarity test
4.5 granger causality test
4.6 co-efficient estimation of the model
4.6.1 effect of taxation on domestic private investment
4.6.2 effect of government spending on domestic private investment
CHAPTER ONE
Background of the Study
Domestic private investment in Kenya refers to the capital invested by individuals,
companies or other entities within the country for the purpose of business expansion,
infrastructure development or other economic activities. This investment plays a significant role
in driving economic growth, creating jobs and improving living standards. Factors influencing
domestic private investment in Kenya include government policies, infrastructure development,
and ease of doing business, access to finance, political stability and market demand. Fiscal
policy refers to the use of government spending and taxation and to influence the economy. It
involves decisions about how much money the government should spend, what it should spend it
on, and how it should collect taxes. The aim is typically to achieve specific economic goals such
as controlling inflation, reducing employment or promoting economic growth.
Fiscal policy plays a crucial role in shaping in shaping private domestic investment, and
its impact can be observed across various scales in Kenya. Globally, studies such as those by
Khan ET at. (2018) have shown that fiscal policies, including tax incentives and government
spending, can significantly influence private investment decisions. They also incentivize private
, sector investment. Subsidies attract Foreign Direct Investment (FDI). By creating a favorable
business environment through fiscal policies, Kenya can encourage multinational corporations to
invest in domestic projects, thereby boosting domestic private investment. Fiscal policies that
focus on improving infrastructure, such as transportation and communication networks, can
enhance Kenya’s connectivity with global markets, making it more attractive for international
investors.
International trade agreements influenced by Kenya’s fiscal policies can facilitate access
to global markets, stimulating exports -oriented investment and fostering economic growth.
In Africa, continental trends highlight the importance of fiscal stability and government
expenditure in stimulating private sector confidence, as noted in exports by African Development
Bank (AfDB). Furthermore, fiscal policies coordinated at the African Union level, such as trade
Agreements/investment treaties, can affect Kenya’s private investment by influencing regional
trade and investment flows. Harmonized fiscal policies within the African Union can create
stability and attract investment to Kenya from other African countries. Fiscal policies aimed at
reducing trade barriers and promoting regional economic integration within the African Union
can increase market size investment opportunities for Kenyan businesses, encouraging domestic
private investment
Coordinated fiscal measures to address common challenges like infrastructure gaps or
regulatory barriers can improve the investment climate across Africa, benefiting Kenya as well.
Regionally or rather in East Africa, the fiscal policies in Kenya have been compared to its
neighbors, with studies by Chris (2020 validating that targeted government spending in
infrastructure and industry enhances investor sentiment. Fiscal policies within the East Africa
Community can harmonize tax regimes and regulatory frameworks, reducing business costs and
1.1 Background of the study 2
1.2 Statement of the Problem 3
1.3 General Objective of the Study 5
1.3.1 Specific Objectives of the Study 5
1.4 Research Hypotheses 5
1.5 Significance of the Study 6
1.6 Scope of the study 6
1.7 Limitation of the study 7
1.8 Assumption of the Study 7
CHAPTER TWO; LITERATURE REVIEW 8
2.1 introduction 8
2.2 overview of independent variable 9
2.3 overview of dependent variables 10
2.4 empirical literature review 11
2.4.1 lending interest rates and domestic 12
2.4.2 objective 2 13
2.4.3 objective 3 14
2.5 theoretical literature 15
2.6 conceptual framework 16
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction
3.2 Research design
,3.3 Location of the study
3.4 Population of the study
3.5 Sampling Procedures and Sample Size
3.6 Research Instrument
3.7 Data Collection
3.8 Ethical Considerations
3.9 Data Analysis
3.9.1 Analytical Model
3.10 Estimation Techniques
3.10.1 Stationarity and Unit Ratio Test
3.10.2 Granger Causality Test
3.11 Diagnostic tests
3.11.1 Multicollinearity Test
3.11.2 Heteroscedasticity Test.
3.11.3 Normality Test
3.11.4 Autocorrelation
3.12 Data Analysis Matrix
CHAPTER 4: RESULTS AND DISCUSSION
4.1 introduction
4.2 descriptive statistics and normality test
4.3 diagnostic tests
4.3.1 multicollinearity test
4.3.2 heteroscedastic test
,4.3.3 autocorrelation
4.4 stationarity test
4.5 granger causality test
4.6 co-efficient estimation of the model
4.6.1 effect of taxation on domestic private investment
4.6.2 effect of government spending on domestic private investment
CHAPTER ONE
Background of the Study
Domestic private investment in Kenya refers to the capital invested by individuals,
companies or other entities within the country for the purpose of business expansion,
infrastructure development or other economic activities. This investment plays a significant role
in driving economic growth, creating jobs and improving living standards. Factors influencing
domestic private investment in Kenya include government policies, infrastructure development,
and ease of doing business, access to finance, political stability and market demand. Fiscal
policy refers to the use of government spending and taxation and to influence the economy. It
involves decisions about how much money the government should spend, what it should spend it
on, and how it should collect taxes. The aim is typically to achieve specific economic goals such
as controlling inflation, reducing employment or promoting economic growth.
Fiscal policy plays a crucial role in shaping in shaping private domestic investment, and
its impact can be observed across various scales in Kenya. Globally, studies such as those by
Khan ET at. (2018) have shown that fiscal policies, including tax incentives and government
spending, can significantly influence private investment decisions. They also incentivize private
, sector investment. Subsidies attract Foreign Direct Investment (FDI). By creating a favorable
business environment through fiscal policies, Kenya can encourage multinational corporations to
invest in domestic projects, thereby boosting domestic private investment. Fiscal policies that
focus on improving infrastructure, such as transportation and communication networks, can
enhance Kenya’s connectivity with global markets, making it more attractive for international
investors.
International trade agreements influenced by Kenya’s fiscal policies can facilitate access
to global markets, stimulating exports -oriented investment and fostering economic growth.
In Africa, continental trends highlight the importance of fiscal stability and government
expenditure in stimulating private sector confidence, as noted in exports by African Development
Bank (AfDB). Furthermore, fiscal policies coordinated at the African Union level, such as trade
Agreements/investment treaties, can affect Kenya’s private investment by influencing regional
trade and investment flows. Harmonized fiscal policies within the African Union can create
stability and attract investment to Kenya from other African countries. Fiscal policies aimed at
reducing trade barriers and promoting regional economic integration within the African Union
can increase market size investment opportunities for Kenyan businesses, encouraging domestic
private investment
Coordinated fiscal measures to address common challenges like infrastructure gaps or
regulatory barriers can improve the investment climate across Africa, benefiting Kenya as well.
Regionally or rather in East Africa, the fiscal policies in Kenya have been compared to its
neighbors, with studies by Chris (2020 validating that targeted government spending in
infrastructure and industry enhances investor sentiment. Fiscal policies within the East Africa
Community can harmonize tax regimes and regulatory frameworks, reducing business costs and
