Abstract:
The main objective of this study was to determine the effect of changes in interest rate on demand for credit and economic growth in Kenya. In order to achieve these objectives, two empirical models were used, the first being the growth equation, with interest rate, private sector credit (as a percentage of GDP) and the other, the macroeconomic variables as the explanatory variables. Time series annual data ranging from 1970-2020 was used in the study. Results showed that investments have a positive and significant impact on economic growth while interest rates on the other hand had a negative and significant impact on demand for credit.
