Factors affecting the foreign direct investment in Kenya (Autoregressive distributed lag model ardlm)

Considering the empirical and literature debates and gaps on factors affecting Foreign Direct Investment, the core objective of this paper was to inquire and investigate the Short Run and Long Run epitope, determinants and the effect of Foreign Direct Investment on the Kenyan economy. This study employed an Autoregressive Distributed Lag Model with a Bound Test for Co-integration in examining the multivariate time series data which converts and covers from 1970-2020 in exploring the short run and long run nexuses among the variables. Findings of the study for the factors effecting the FDI in Kenya, in the long run, gross savings, interest rate, trade openness, growth domestic product have a significant and positive link with Foreign Direct Investment inflows into the Kenya. On the other hand, rate of inflation, infrastructure and exchange rate have a negative and significant association with Foreign Direct Investment. According to the variable of infrastructure the study revealed that infrastructure is negatively associated with FDI and it is contrary with many studies made by this topic. The results in this study imply the need for proper management of the inflationary pressures on the economy which affects FDI inflows negatively. So, the country's monetary administrations should improve and implement policies and procedures that will effectively manage all inflation and interest rate in order to come up with long lasting and sustained at levels that will guarantee raising the degree of FDI inflow.