The Effect of Public Capital on Private Investment in Kenya

This paper analyses the effect of public capital on private investment in Kenya using time series data from 1980-2014. Vector Auto regression (VAR) model was applied to analyze the data. The empirical findings show that public investment promotes private investment in the short-run and in the long-run.  This implies that a well-targeted public investment is important in minimizing bottle-necks thereby stimulating private investment. Based on the findings, the study recommends that the government to continue strengthening and pursuing investment policies in various sectors of the economy that could foster private investment. The government needs also to pay more attention to prudent investment to ensure reduction in private transactions costs thereby creating more opportunities for private investment