Investment Incentives as a Mediator in the Relationship between Macroeconomic Variables and Growth of Private Domestic Investment in Kenya

Abstract

The objective of this study was to investigate the mediating effect of investment incentives on the growth of private domestic investment in Kenya using time series data for the period 1997 to 2018. To test for mediating effect, the study used (Baron & Kenny, 1986) approach which propose a four-step procedure in which several regression analyses were conducted and the significance of the coefficients examined. The results did not consistently support a full mediation hypothesis, given that the coefficients did not consistently change in magnitude and significance. Therefore, the study does not reject the null hypothesis that investment incentives do not meditate on the relationship between macroeconomic variables and the growth of private domestic investment in Kenya. The results of this study will benefit policy makers by providing them with data-based evidence that will guide them in making appropriate policies that encourage growth of private domestic investment in Kenya and institute proper management of private domestic investments to boost economic growth in Kenya. Keywords: Tax expenditure, Investment tax expenditure, Investment tax credit, Private domestic investment.

Investment Indicators and Economic Growth in Nigeria: A Systematic Review

“…This model, however, cannot be used when the underlying variables are integrated of order I. (2). None of the variables in this study were integrated of order I.…”

“…None of the variables in this study were integrated of order I. (2). As a result, the econometric methodology is eased of the burden of deciding the order of integration among variables and pre-testing for unit roots [49].…”

“…Investment is regarded as the engine of dynamic economic growth, which in turn contributes to the achievement of political and socioeconomic goals. Fluctuations in investment have a significant impact not only on aggregate demand, but also on an economy's factor productivity and long-term economic growth [2]. This has prompted several countries to concentrate on improving favorable investment conditions.…”

“…Economic growth is boosted by public investment because it encourages new private investment to benefit from the higher productivity it generates. When the government invests in public goods like physical infrastructures or services, it offers companies a chance to invest, which creates an economic cycle of opportunity [2]. Public investment boosts output, attracts private investment, and reduces unemployment.…”