Revista de Pesquisa de Economia

Crowding in or Crowding Out? Economic Growth, Public and Private Investment in Kenya

Cyrus Mutuku and Monica Kinyanjui

Kenya seeks to realize vision 2030 by growing the economy by 10% annually. However, this has not been realized in the last 7 years. Private and public investments are the main ingredients in driving the expected growth rates. However, both are under performing especially public investments given fiscal constraints and ballooning recurrent expenditure. It is essential to know whether the two investments are complementary or substitutes. Using a VAR model and annual time series data spanning 1960 to 2016, this study reveals that public investments crowds out private investments in the short run.