The Link between Expansionary Fiscal Policy and Resilience to Covid-19 Economic Shocks in Kenya: Evidence from Nairobi City County

Abstract

This study examines the nexus between expansionary fiscal policy and resilience to COVID-19 economic shocks in Kenya. We focus on two instruments of fiscal policy namely; public expenditure and public revenue from taxation. The study is on Nairobi City County, Kenya’s largest county by population size and contribution to the country’s Gross Domestic Product (GDP). With a target population of two million economically active individuals, the study uses a sample of 110 respondents drawn from all the 17 constituencies in the county using quota sampling. Using multiple regression, increased public expenditure leads to a slight increase in resilience to COVID-19 economic shocks while decreased taxation does not lead to an increase in resilience to COVID-19 economic shocks, thus our findings suggest that increased public expenditure and reduced taxation during the pandemic period in Nairobi City County had minimal implications on the resilience to covid-19 economic shock in Nairobi City County.