Moderating Effect of Political Instability on ICT and Economic Growth Nexus in Kenya: ARDL Bound - Co-Integration Approach

Abstract

The government has attempted to target specific macroeconomic factors in order to stimulate economic growth in Kenya through monetary and fiscal policies. Despite these efforts, Kenya's GDP growth is hampered by high interest rates and high interest rate volatility. Kenya's ability to address macroeconomic instability hinges on its ability to increase economic growth. Auxiliary evidence shows that perspectives on the relationship between ICT and economic growth are segmented. The goal of this study was to determine the impact of ICT on economic growth in Kenya, as well as the moderating effect of political instability on the relationship. The research was based on Solow's theory of growth. An explanatory research design was used, with data spanning from 1990-2020 obtained from Kenya Bureau of Statistics. In the empirical analysis, the study used the bound test to test for a long-run relationship and the Autoregressive Distributed Lag model (ARDL) to evaluate the relationship between the variables. The data was subjected to an Augmented Dickey Fuller (ADF) test to determine stationarity.The long run ARDL results indicated that the coefficients of; ICT rate were insignificant . However with the introduction of political instability as the moderator ICT was significant and positively affected economic growth. Political instability moderated the relationship between ICT ( and economic growth. As a result, promoting effective governance should help to improve political stability. The findings of this study will help the government figure out how to address the problem of low economic growth. According to the study, the government should invest in the ICT sector to improve its accessibility and affordability. Additionally, the government should work to improve political stability and good governance by gradually establishing institutions that uphold the rule of law and provide security.