Master Theses: Department of Economics

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Browsing Master Theses: Department of Economics by Subject "Thesis"

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    Fiscal Deficit Financing and Inflation in Sub-Saharan Africa
    (UoEm, 2023-12) Sumba, Jerry Ogutu
    Financing fiscal deficit in any country is undertaken with the sole purpose of promoting economic growth and development. However, fiscal deficit financing can be a major source of macroeconomic instability, especially inflation, depending on how it is achieved. Inflation in sub-Saharan Africa has persistently been high, almost double-digit, and volatile compared to other areas with developing countries such as Asia and Latin America. Thus, this study aimed at analyzing the relationship between fiscal deficit financing and inflation among sub-Saharan African countries and determine whether the inflation rate depends on the mode of financing adopted. This study's initial analysis determined the relationship between fiscal deficit financing and inflation while disaggregating deficit financing into domestic and foreign borrowing. This analysis applied a two-step system Generalized Method of Moments model to the secondary panel data for 44 sub-Saharan African countries from 2005 to 2020. In its second analysis stage, this study checked whether the mode of deficit financing selected by the country matters on the inflation level. The quantity scaling analysis determined the relative effect of fiscal deficit financing tools on inflation. The findings of this study reveal that financing fiscal deficit through foreign and domestic borrowing positively influences inflation among sub Saharan African countries, and the severity of the effects on inflation differs between domestic and foreign borrowing. Foreign borrowing was found to have less impact on increasing price levels than domestic borrowing. This is indicated by the domestic borrowing's scaling quantity analysis value of 0.210 against 0.105 for foreign borrowing. Similarly, this study found that one-year lagged inflation, official development assistance, gross domestic product, change in money supply and exchange rate have positive effect on inflation although the effect of the money supply and exchange rate were insignificant. On the other hand, real interest rates and capital formation were found to have a negative effect on inflation as well. The robustness of the test for the obtained results was checked in two ways as follows: First, the two-step system GMM analysis was conducted on the whole sample of 44 sub-Saharan African countries as well as on a sub-group of 20 low and 24 middle-income countries within the region to see whether the results obtained vary on splitting the data. In all estimation models, the results obtained show consistency across all groups of countries in terms of the coefficient sign, size, and significance level, implying that the estimated results are highly robust. Following the findings, this study recommends control of the fiscal deficit through prudent fiscal policies that minimize resource wastage and reduce the fiscal deficit. Second, the study recommends a reduction of domestic debt as a component of public debt to achieve macroeconomic goals at a lower cost to society through less inflation effect. Third, following the negative relationship between real interest rate, capital formation and inflation, the current study recommends sub-Saharan African countries to increase capital formation (domestic investment) and interest rate to achieve macroeconomic stability.
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    Real Estate Development, Human Capital and Economic Growth in Kenya
    (UoEm, 2023-12) Mutuku, Rainard Munyao
    Having a stable and high level of economic growth within a country is associated with numerous benefits to the citizens. In developing countries such as Kenya, the rate of economic growth has been low and always below the projected rate each year. In developed countries such as Germany, Japan, and Iceland, development in the real estate sector and investment in human capital have been identified as probable boosters of economic growth. In Kenya, many of the studies done to investigate some of the boosters of economic growth have only been restricted to specific counties thus covering a small scope in terms of geographical area. Therefore, this study assessed the macroeconomic determinants of real estate development and evaluated the effect of real estate sector development and investment in human capital on economic growth in Kenya using secondary time-series quarterly data spanning from the year 2009Q1 to 2019Q4. The study adopted the neoclassical growth theory, the endogenous growth model, and the human capital theory. To achieve the objectives, the study was guided by a causal-research design. Data for the study variables were extracted from the Kenya National Bureau of Statistics and the Central Bank of Kenya. The study utilized an autoregressive distributed lag (ARDL) model for the analysis. Study results revealed that economic growth, central bank rate, and inflation play a key role in enhancing the development of the real estate sector in the long run. The study also established a long-run relationship between real estate development, inflation, the central bank rate, and economic growth. Specifically, in the long run, the study established that inflation and the central bank rate were negatively and significantly associated with economic growth. This study makes significant progress in providing empirical evidence on the effect of real estate development, human capital, the central bank rate, and inflation on economic growth in Kenya. These findings are useful to government policymakers, academicians, and investors in the real estate and education sector. Additionally, the findings enrich the existing theoretical and empirical literature on the real estate sector and human capital. This study recommends strengthening policies by government policymakers to encourage investment in the real estate sector and control lending interest rates, and inflation rates, as they are crucial for the growth of many economies not only in Kenya but also in other developing countries.