Faculty of Business and Economics

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Author: search.filters.author.Dr. Alphonce Juma OdondoSubject: search.filters.subject.Inflation

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    Nexus between Inflation and Real Estate Growth in Kenya:
    (American Research Institute for Policy Development, 2021-03) Dr. Alphonce Juma Odondo
    Real estate has been one of the most profitable industry world over. In Kenya, the industry has grown exponentially and contributes significantly to her GDP. The growth has been ascribed to demographic trends like rapid urbanization at 4.4% p.a against the world’s 2.5% p.a. The trends have led to rising demand for residential services with accumulated deficit of over 2 million units. This scenario attracted the attention of Kenya Government to the extent that it identified affordable housing as one of the key strategic focus areas in its Medium Term Plan III for 2018-2022. Despite the attention, paucity of information on the nexus between real estate growth and its determinants like inflation continues to hamper policy formulation in this sub sector. In addition, studies on the nexus have generated mixed results and debate in the realm of economics. The study utilized world bank time series data and estimated a vector error correction model which revealed absence of long run nexus between real estate growth and various dimensions of inflation (core, energy and food). However, short run causality running from energy inflation to real estate growth exists. The energy inflation had a significant negative effect on real estate growth. Core inflation had a positive significant effect while food inflation had an insignificant positive effect. Thus, ceteris paribus, in order to enhance growth of the real estate industry, energy inflation should be reduced and ensure continuous stabilization of core and food inflation as an incentive to potential investors and the households seeking to acquire housing services in the economy
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    Dynamics of Core Inflation, Energy Inflation, Food Inflation and Manufacturing Sector Output Growth in Kenya: Econometric Analysis of Causality and Effects
    (www.iiste.org, 2021-01-31) Dr. Alphonce Juma Odondo
    World over, the manufacturing sector plays an important role in spurring economic development by boosting employment opportunities for semi-skilled labour and building a nation’s competitiveness through exports. Globally, only a few nations have managed to realize their development status without manufacturing sector playing a leading role. Kenya has not managed to develop a robust manufacturing sector and its growth has been majorly ascribed to the agricultural and service sectors. It has therefore, experienced de industrialization as evidenced by the decline in GDP contribution by the manufacturing sector from a paltry 10% in 2018 to 9.7% in 2019. The de industrialization has been characterized by fluctuating inflation rates, a scenario that has elicited debate as to whether there exists any nexus between manufacturing sector output growth and inflation rate. A few empirical studies have been conducted on the same, however, the exact relationship is not well defined. Furthermore, inflation has been largely treated as an aggregate, a scenario that hampers policy formulation. A disaggregated approach to the analysis thus motivated this study. Time series data from the world bank was used and VECM estimated to assess long run dynamics after stationarity test by ADF and Cointegration test by Johannes’s approach. Short run causalities were assessed via Wald test. The study revealed long run relationship between manufacturing output growth and the variables (core inflation, energy inflation and food inflation). Short run causality running from each of the inflation types to manufacturing output growth also exists. Food inflation negatively and significantly influences manufacturing output growth while core inflation has significant positive effect on the same. To enhance manufacturing output growth in Kenya, food inflation should be reduced and stabilized. In the same vain, low and stable level of core inflation should be ensured over time.