Current Account Deficit Dynamics in Kenya: Evidence from Time-series Data (1980-2014)
Journal Title: Journal of Economics, Management and Trade - Year 2017, Vol 19, Issue 2
Abstract
As a rule of thumb, current account deficit should not exceed 5% of GDP. If it exceeds, it must raise concerns about its sustainability. In Kenya, current account balance deficit increased to 10.5% of the GDP by 2014 and 8.3% in 2015. Empirical evidence shows that there is an unsustainable current account deficit in Kenya. Unsustainable current account deficits are a potential recipe for a currency crisis and current account reversal which have negative implications on macroeconomic stability of a country. This study sought to determine the drivers of current account balance and policies that should be put into place to revert the balance to sustainable levels. It used time series data spanning 1980-2014 and employed VAR and VECM models. The estimated long run co-integrating model revealed that financial deepening in Kenya has no effect on the current account balance at 5%, 10% and 1% statistical significance levels. However, trade openness, oil prices, fiscal deficit, output gap, real effective exchange rate, GDP per-capita, dependency ratio and net financial assets significantly affect current account balance.
Authors and Affiliations
Stephen Benard Mbithi, Cyrus Mutuku
Keywords
Related Articles
- EP ID EP319895
- DOI 10.9734/JEMT/2017/31334
- Views 95
- Downloads 0
Channels of Foreign Remittances and their Relative Efficiency in Sylhet Region of Bangladesh
The study examines the different channels of receiving foreign remittances and measures their relative efficiency in selected areas of Sylhet region in Bangladesh. The study was carried out based on the primary data coll...
Cost and Returns Analysis of Coir Products: A Case of East Godavari District of Andhra Pradesh
This study was analysing the cost and returns of coir products in East Godavari District of Andhra Pradesh. The production performance of coir industry have been examined. The primary data collected from 40 sample coir p...
Growth Effects of Public Recurrent Expenditure in Kenya
Aims: There is a growing consensus that economic growth is a key enabler for successful and sustainable fiscal consolidation. In view of this, this paper examines the growth effects of the high budgetary allocation for p...
An Economic Analysis of Volume and Price Behaviour of Vegetables in the Republic of Trinidad and Tobago
Aims: This study was aimed to examine the behaviour and pattern of fluctuations in market volume and prices of 21 major vegetables consumed in Trinidad and Tobago. Study Design: The study used monthly data for a period...
The Internal Control Systems of GN Bank- Ghana
GN Bank is one of the numerous universal banks in Ghana. A bank is considered a universal bank if it is licensed with a license ‘A’ by the Bank of Ghana. Some of the universal banks in Ghana are GCB Bank, HFC Bank, First...