Economic Growth, Electricity Access, and Remittances in Kenya

Abstract

This paper investigated the long-run relationship between gross domestic product, access to electricity, and remittances within the multivariate framework in Kenya using the data for the period 1987-2018. The autoregressive distributed lag (ARDL) bounds test was used to investigate the long-run relationship. Causality between variables was investigated by use of the Granger causality method. The bounds test indicated that there is cointegration when gross domestic product, electricity access, and remittances are dependent variables. The long-run estimation of coefficients suggests that electricity access and remittances have significant positive impact on economic growth in Kenya in the sample period. Causality analysis provides evidence that there is unidirectional Granger causality running from gross domestic product to electricity access and not vice versa and from gross domestic product to remittances and not vice versa. There was no causality between remittances and electricity access. The policy implications of the paper suggest that the government and other companies concerned should enhance electricity access and encourage inflows of remittances as these contribute positively to economic growth in Kenya.