Impact of International Trade on Economic Growth in Kenya

Abstract

This paper investigates the impact of international trade on the economic growth of Kenya by using the autoregressive distributive lag model (ARDL) approach with long-run and short-run coefficients, bound tests, and an error correction model. The study further adopts significant exchange rate, export, import, and gross domestic product (GDP) effects on Kenyan economic growth. The augmented dickey Fuller (ADF) test for unit root revealed that the series was of a different order, differing at the level and first differing to check stationarity to meet the intended goals. Data sources included World Bank and IMF data from 1970 to 2019. The result revealed that the exchange rate and import are positively associated with the gross domestic product (GDP), the exchange rate is positive and statistically significant, and export is negatively related to the gross domestic product (GDP) and is statistically insignificant. To boost exports, Kenya must continue its bilateral, regional, and international trade activities; offer technical and funding provisions to micro, small, and medium-sized initiatives in value chains and companies manufacturing the identified talented export goods; and support the progress of market- and product-specific initiatives.