Discussion Paper No 353 of 2024 on Assessment of the Effect of General Elections on Macroeconomic Indicators in Kenya: The Event Window Analysis Approach

Abstract

Elections have various implications on economic activities in any country. This study assessed the effect of Kenya’s general elections on the performance of macroeconomic indicators, applying the event window approach. The last five elections in Kenya; 2002, 2007, 2013, 2017 and 2022 have had mixed effects on the economy. These elections can be categorized into four broad groups: elections that led to a change of regime, elections that were followed by post-election violence or public demonstrations, elections that were annulled and held a fresh or contested at the supreme court, and elections that were held peacefully as expected. These four broad categories of elections, therefore, informed the four specific objectives of the study. The event window methodology was used to answer the research objectives. This methodology was preceded by identifying the pre-election period, actual election period and post-election period and assessed the performance of the key macroeconomic indicators in each phase. Various macroeconomic indicators were analyzed in the study, including key prices, rates, and index variables. The results vary by indicator. Elections largely have a neutral effect when peaceful and economic activities pick up immediately. However, they have a staggering effect on macro indicators when they are protracted. On the other hand, elections that lead to a regime change tend to improve macro indicators when coupled with high expectations by electorate but may worsen indicators when fiercely contested or uncertainty abounds on the winning candidate. Lastly, elections accompanied by chaos or demonstrations had an adverse effect on performance of macroeconomic indicators for Kenya. The study proposes the following policy recommendations based on the findings: firstly, the pre-election phase is important as many macroeconomic indicators begin to reflect the effects of elections even before the election day