Foreign Direct Investment and Economic Growth in Kenya

Abstract: Foreign direct investment is a medium for technology transfers between countries, a stimulant to economic growth, trade promotion, and international economic integration between economies; thus, many studies have studied the relationship between growth and foreign direct investment. This study also aims to investigate the relationship between economic growth and foreign direct investment in the East African country of Kenya. The study used the growth accounting approach as the basis for an econometric model. The data used is a time series from 1970 to 2019. An ordinary least squares method is employed to investigate whether foreign direct investment is significantly associated with economic growth. The findings show that the relationship between foreign direct investment and economic growth in Kenya is negatively insignificant. These findings can further the economic growth and foreign direct investment research on individual African countries whilst considering a country’s individual circumstances, like economical history, in comparison to cross-country studies, where each country’s individual circumstances might not be considered.