Impact of Government Expenditure in Transport Infrastructure on Gross Domestic Product in Kenya

Abstract

The government of Kenya has continued to increase her expenditure on infrastructure over the years. This has accentuated the need for empirical investigation on the impact of government expenditure on transportation infrastructure on GDP in Kenya from 1964 to 2015. The study used the Keynesian theory that government expenditure contributes to economic growth of the country. The data was tested for unit roots using the Augmented – Dickey Fuller test and cointegration was performed before granger causality test was done to test for direction of causality among the variables. The Johansen Maximum Likelihood test was applied which showed that there exists a long run relationship between government expenditure on transport infrastructure and GDP in Kenya. Granger Causality test revealed that causality runs from GDP to transport expenditure.  The study concluded that government expenditure on transport infrastructure has a significant impact on GDP in Kenya.

Keywords: Government Expenditure, Gross Domestic Product, Transport Infrastructure, Cointergration, Granger Causuality.