Macroeconomic Determinants of Kenya's Manufactured Exports to Regional Trading Blocs in East African Countries

Abstract

Manufactured exports are closely linked to the process of structural transformation within economies. This article examines the determinants of manufactured exports of Kenya to the trading blocs in the East African region. The article was adapted from a thesis that analysed the manufactured exports of Kenya using panel data modelling and secondary data from the country’s six trading partners within the East African community between 1976 and 2022. The factors examined in this article include the level of human development, the level of FDI within the country and the development of the country’s trade infrastructure. Other variables that were controlled for in the analysis of the manufactured exports of Kenya included the country’s GDP, the distance between the exporting and importing countries, the inflation rates of the two countries and the historical and geographical linkages between the two countries. The methodology for this article used an explanatory design with data described through descriptive statistics, correlation coefficients, unit-root tests, cointegration tests, linear regression models and model selection tests. The results of the study indicated that the GDP of the importing and exporting countries had positive and statistically significant coefficients. The distance between the two countries had a negative and statistically significant coefficient. The level of FDI had a positive and statistically significant coefficient. The infrastructure of the exporting country had a negative coefficient in the final model. Historical and geographical variables had positive and statistically significant coefficients. The study concludes that Kenya’s manufactured exports depend on the level of productive investments into the economy, trade infrastructure, the level of human development and the stability of the economy. To increase the manufactured exports of Kenya, policies that aim to attract FDI into its manufacturing industries, improve trade infrastructure, upgrade the technical skills within the manufacturing industries and increase the trade facilitation between East African Community countries will be beneficial to the Kenyan economy