Effect of Crude Oil Prices on Economic Growth in Kenya in the Period 1981 To 2018
DOI:
https://doi.org/10.14738/assrj.710.9209Keywords:
Crude oil prices; economic growth; price volatility; alternative energyAbstract
Crude oil is an essential resource in the day-to-day activities of a functional economy. Crude oil and petroleum products constituted 14 percent of the Kenya’s imports in 2017 up from 12 percent in 2015. As Kenya moves into an oil-exporting country, there is a need to measure the role crude oil prices play in directing the economic growth of the country. This study assessed the effect of crude oil prices on the economic growth of Kenya. Gross capital formation, bank lending rate, employment rate and debt servicing were used as control variables in the models estimated. The study employed secondary data for the period 1981 to 2018. The findings indicate that crude oil prices had a positive but insignificant effect on economic growth. The study recommends that the government diversifies its sources of energy to ensure that economic activity economy is not deeply connected to crude oil prices because of their volatility.
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[2]. Bacon, R. and Kojima, M. (2008) “Coping with Oil Prices Volatility”, Energy Sector Management Assistance Programme Report, The World Bank Group, USA, 1-174
[3]. Ghosh, S. (2011). Examining crude oil price–Exchange rate nexus for India during the period of extreme oil price volatility. Applied Energy, 88(5), 1886-1889.
[4]. OEC. (2019). OEC - Kenya (KEN) Exports, Imports, and Trade Partners. Retrieved December 1, 2019, from https://oec.world/en/profile/country/ken/
[5]. Bodenstein, M., Guerrieri, L., & Gust, C. J. (2013). Oil shocks and the zero bound on nominal interest rates. Journal of International Money and Finance, 32, 941-967
[6]. Dunn, S., & Holloway, J. (2012). The pricing of crude oil. RBA Bulletin, 65-74.
[7]. He, Y., Wang, S., & Lai, K. K. (2010). Global economic activity and crude oil prices: A cointegration analysis. Energy Economics, 32(4), 868-876.
[8]. Ciner, C., Gurdgiev, C., & Lucey, B. M. (2013). Hedges and safe havens: An examination of stocks, bonds, gold, oil, and exchange rates. International Review of Financial Analysis, 29, 202-211.
[9]. Rathesh, J., Nagarjuna, M.K., & Adarsha, U.S. (2015). Impact of crude oil prices on global economy. International Journal of Trade & Global Business Perspectives, 4(2), 1692-1704. Retrieved from https://www.academia.edu/17328414/Impact_of_crude_oil_prices_on_global_economy
[10]. OEC. (2017). Products imported by Kenya. Retrieved December 1, 2019, from https://oec.world/en/visualize/tree_map/hs92/import/ken/all/show/2017/
[11]. Behmiri, N. B., & Manso, J. R. P. (2013). How crude oil consumption impacts on economic growth of Sub-Saharan Africa?. Energy, 54, 74-83.
[12]. Chaudhry, K. A. (2015). The price of wealth: Economies and institutions in the Middle East. New York. Cornell University Press.
[13]. Hamilton, J. D. (2009). Causes and Consequences of the Oil Shock of 2007-08 (No. w15002). National Bureau of Economic Research.
[14]. Mert, U. (2016). The impact of the global financial crisis on crude oil price volatility. Yönetim ve Ekonomi Araştırmaları Dergisi, 14(2), 64-76.
[15]. Hamilton, J. D. (1983). Oil and the macroeconomy since World War II. Journal of political economy, 91(2), 228-248.
[16]. Sodeyfi, S., & Katircioglu, S. (2016). Interactions between business conditions, economic growth and crude oil prices. Economic Research-Ekonomska Istraživanja, 29(1), 980-990.
[17]. Kamau, M., & Omondi, D. (2018, November 14). Oil import bill surge eats into forex reserves : The Standard. Retrieved December 1, 2019, from https://www.standardmedia.co.ke/article/2001302602/oil-import-bill-surge-eats-into-forex-reserves
[18]. Hamilton, J. D. (2008). Oil and the Macroeconomy. The new Palgrave dictionary of economics, 2.
[19]. Filis, G., & Chatziantoniou, I. (2014). Financial and monetary policy responses to oil price shocks: evidence from oil-importing and oil-exporting countries. Review of Quantitative Finance and Accounting, 42(4), 709-729.
[20]. Kibunyi, A., Nzai, C. C., & Wanjala, K. (2018). Effect of Crude Oil Prices on GDP Growth and Selected Macroeconomic Variables in Kenya. Journal of Economics and Business, 1(3), 282-298.
[21]. Ghalayini, L. (2011). The interaction between oil price and economic growth. Middle Eastern Finance and Economics, 13, 127-141.
[22]. Mureithi, A. W. (2014). Oil import volatility and its effect on economic growth in Kenya. University of Nairobi, Nairobi, Kenya.
[23]. Kuboniwa, M. (2014). A comparative analysis of the impact of oil prices on oil-rich emerging economies in the Pacific Rim. Journal of Comparative Economics, 42(2), 328-339.
[24]. Odera, E. A. (2015). The relationship between international diesel price and the inflation rate in Kenya (Doctoral dissertation, University of Nairobi, Nairobi, Kenya). Retrieved from http://erepository.uonbi.ac.ke/bitstream/handle/11295/93859/ODERA_The%20relationship%20between%20international%20diesel%20price%20and%20the%20inflation%20rate%20in%20Kenya?sequence=3&isAllowed=y
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[26]. Ftiti, Z., Guesmi, K., Teulon, F., & Chouachi, S. (2016). Relationship between crude oil prices and economic growth in selected OPEC countries. Journal of Applied Business Research, 32(1), 11.
[27]. Rostin, R., Muthalib, A. A., Adam, P., Nur, M., Saenong, Z., & Baso, J. N. (2019). The Effect of Crude Oil Prices on Inflation, Interest Rates and Economic Growth in Indonesia. International Journal of Energy Economics and Policy, 9(5), 14.
[28]. Kim, H.-Y. (2013). Statistical notes for clinical researchers: assessing normal distribution (2) using skewness and kurtosis. Restorative Dentistry & Endodontics, 38(1), 52–4. http://dx.doi.org/10.5395/rde.2013.38.1.52
[29]. Hadri, K., & Kurozumi, E. (2012). A simple panel stationarity test in the presence of serial correlation and a common factor. Economics Letters, 115(1), 31-34.
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Published
2020-11-03
How to Cite
ONONO, P., Mutuma Kiambi, B., & Maingi, J. (2020). Effect of Crude Oil Prices on Economic Growth in Kenya in the Period 1981 To 2018. Advances in Social Sciences Research Journal, 7(10), 340–349. https://doi.org/10.14738/assrj.710.9209
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