Inflationary Effects, Exchange Rate and Economic Growth Rate in Kenya
Journal Title: Journal of Economics, Finance and Management Studies - Year 2022, Vol 5, Issue 12
Abstract
Human civilization has always been centred on economic growth. Economic growth difficulties are the main focus of government policy and study in the modern, globalized world. Kenya's overarching goal is to become a middle-income nation that is both globally competitive and wealthy and provides its residents with a high quality of life. The Kenya Vision 2030 is the country's development strategy. Different perspectives on the relationship between inflation, exchange rate and economic growth have shown diverging results. This study's particular goals were to determine the effect of inflation and exchange rate on Kenya's economic growth using Keynesian theory. This study used explanatory research design and adopted positivism philosophy. Annual data from 1980 to 2019 giving 40 observations was used. Vector Error Correction (VECM) Model was customized in analyzing the long run and short-run contribution of macroeconomic variables and gross domestic product in Kenya. From the VECM model, R-square value was 58.62, Chi-square of 26.913 (p > Chi2 = 0.0494) showing VECM was fit for parameter estimation. The coefficient of exchange rate was -0.828 with a p-value of 0.001 while the coefficient of inflation was 0.055,p value=0.020.The findings of this study will provide good fiscal and monetary policy recommendations to the government as well as guidance on how to solve the issue of weak economic growth. Because economic growth is predicted to slow down when inflation exceeds a particular threshold, the nation must control inflation. The government should support macroeconomic policies that strengthen the stability of Kenya's exchange rate versus the major world trading currencies while aiming for an ideal level of inflation because foreign currency rates have a detrimental impact on economic growth in Kenya.
Authors and Affiliations
Kitum Toroitich Edward , Dr. Richard Siele, Dr. Alfred Serem
Keywords
Related Articles
- EP ID EP726593
- DOI 10.47191/jefms/v5-i12-03
- Views 17
- Downloads 0
Effect of Selected Macroeconomic Variables on Budget Deficit in Kenya
Macroeconomic stability has been a concern to many economies as it shows the economic health of a nation. Kenya has had unsustainable and persistent fiscal deficit which has been phenomenal in the recent past despite sev...
Shariah Financing Model on Salt Mini Plant UTM in Order to Increase Production and Income Numbers
The purpose of this study is to provide an alternative model of Islamic financing to the salt business, namely the Mini Plant of Salt UTM. The existence of a shariah financing system that applies the principle of profit...
The Influence of Education and Training on the Performance of Military Personnel Through Competencies at RSAU Dr. M. Munir
The aim of this research is; 1) To describe the variables of education and training, competence and performance of military personnel at RSAU dr. M. Munir; 2) To analyze the effect of education and training on the compet...
CSR Shifting to HSR? A Critical Analysis of Future Trends
In the past few years a shift is seen in the use of Corporate Social Responsibility (CSR) to a Human Social Responsibility (HSR) approach. This is based on the idea that a business has its employees as a resource and not...
An Analysis of Individual Taxpayers’ Behavior on the Use of E-Filing and E-Form in Submitting Annual Tax Return by Implementing a Phenomenological Approach
E-filing and e-form are considered as online tools that may be utilized as an alternative for taxpayers to report their annual tax returns. These two applications are expected to be used as the right solution for taxpaye...