Implications of the Association Between Forest Cover and the Central Bank Rate of Return on Sustainable Forest Management in Kenya

Abstract

Forests play an important role in human well-being and sustainable development. However, in the wake of the rising deforestation and climate change, information on how monetary policy factors, especially the Central Bank Rate of Return (CBRR) affect sustainable forest management in developing countries is scarce. This study examined the relationship between CBRR and forest cover in Kenya for the period of 2006-2022, with the aim of contributing to a better understanding of the factors influencing sustainable forest conservation and management. A literature review and quantitative data analysis using pearson's correlation, multiple regression and ANOVA showed a weak, negative correlation between the CBRR and forest cover (r =-0.36, p<0.05), indicating that a higher CBRR is generally associated with lower forest cover value in Kenya. This result indicates that there could be some relationship, but the data points remained scattered such that the correlation is closer to zero (R-squared = 0.130). Moreover, the correlation coefficient also suggests that the relationship between the two variables is weak. Analysis of variance (ANOVA) found a statistically significant difference between the means of the CBRR and forest cover groups (F (1,32) = 21.93, p< 0.000), supporting the idea that the CBRR could have an impact on the forest cover percentage in Kenya. However, this impact could be weak and influenced by other factors not captured in the model. This paper recommends that forest management stakeholders in Kenya consider the potential influence of changes in the CBRR on forest cover and the need for a coordinated effort from policymakers, researchers, and local communities to address the complex issues driving forest cover change in the country.