Original Research Article

Remittances and economic growth in Kenya (1970-2010)

Kennedy Nyabuto Ocharo (PhD)

Department of Economic Theory, School of Economics, Kenyatta University, P.O BOX 43844-00100, Nairobi, Kenya.

*Corresponding Author’s E-mail: kennyabuto@yahoo.com, Tel.: +254 721 156998

Accepted November 13, 2014

Abstract

Statistics show that remittances to Kenya have been increasing over the years. Studies on the effect of remittances on economic growth in Kenya are limited and have not included private capital inflows as one of the determinants of economic growth. This study investigated the effect of remittances on economic growth in Kenya. Data was sourced from the World Bank’s African Development Indicators and various Economic Surveys and Statistical Abstracts for the period 1970-2010. The study used the ordinary least squares estimation to determine the effect of remittances on economic growth. The study found that the coefficient of remittances as a ratio of gross domestic product was positive and significant. The Government of Kenya should put in place policies that encourage remittances.

Keywords: Diaspora, Economic Growth, FDI, Portfolio Investment, Remittances