Gross Fixed Capital Formation and Economic Growth in East Africa Community States

Peter Nyajure Achar; Otieno Odhiambo Luther; Ondigo Herick Ochieng’; Oleche Martine Odhiambo

Peter Nyajure Achar
Otieno Odhiambo Luther
Ondigo Herick Ochieng’
Oleche Martine Odhiambo

Abstract

Purpose: The purpose of this paper is to examine the effect of Gross Fixed Capital Formation on economic expansion of East African Community Countries.

Design/Methodology: The research employed Panel longitudinal, cross sectional and correlational design study period from 2000 to 2022. The study subjected panel data from six (6) EAC member states to pooled OLS Estimation.

Findings: The study found that the rate of economic growth was influenced by the rate of gross fixed capital formation. The acquisition of capital assets such as roads, railways, schools, hospitals, machinery, plants, and new businesses greatly influenced the rate of economic growth of the EAC member’s states.

Originality/Value: This study provides more knowledge on how EAC members’ states can rely on the study findings to leverage on gross fixed capital formation to build their economic growth.

Implication to Policy: The study implications are that use joint policy on favorable tariffs on capital investments to boost the economic growth of the EAC bloc.

Keywords: Gross Fixed Capital Formation, Economic Growth, and Pooled OLS