Monetary and Fiscal Policy Shocks and Economic Growth in Kenya: VAR Econometric Approach
Journal of World Economic Research
Volume 3, Issue 6, December 2014, Pages: 95-108
Received: Oct. 31, 2014; Accepted: Nov. 19, 2014; Published: Nov. 25, 2014
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Authors
Mutuku Cyrus, Kenya Institute for Public Policy research and Analysis, Nairobi, Kenya; School of Economics, University of Nairobi, Nairobi, Kenya; School of Business and Economics, Mount Kenya University , Nairobi, Kenya
koech Elias, School of Business and Economics, Mount Kenya University , Nairobi, Kenya
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Abstract
In macroeconomic policy design and management, monetary and fiscal policies are of great essence. However, the relative effectiveness of these policies has been subject to debate in both theoretical and practical realms for a long period of time. This paper investigated the relative potency of the policies in altering real output in Kenya using a recursive vector autoregressive (VAR) framework. The analysis of variance decomposition and impulse response functions reveled that fiscal policy has a significant positive impact on real output growth in Kenya while monetary policy shocks are completely insignificant with fiscal policy shock significantly alters the real output for a period of almost eight quarters.
Keywords
Monetary Policy, Fiscal Policy, Vector Autoregressive Model, Real Output, Policy Design
To cite this article
Mutuku Cyrus, koech Elias, Monetary and Fiscal Policy Shocks and Economic Growth in Kenya: VAR Econometric Approach, Journal of World Economic Research. Vol. 3, No. 6, 2014, pp. 95-108. doi: 10.11648/j.jwer.20140306.14
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