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The impact of real exchange rate volatility on economic growth: Kenyan evidence

Author

Listed:
  • Danson Musyoki

    () (Catholic University of Eastern Africa Faculty of Commerce)

  • Ganesh P. Pokhariyal

    () (University of Nairobi School of Mathematics Author-Name: Moses Pundo
    Catholic University of Eastern Africa Faculty of Arts and Social Science)

Abstract

This paper examines the impact of real exchange rate volatility on economic growth in Kenyan. The study employed the Generalized Autoregressive Condition of Heteroscedasticity (GARCH) and computation of the unconditional standard deviation of the changes to measure volatility and Generalized Method Moments (GMM) to assess the impact of the real exchange rate volatility on economic growth for the period January 1993 to December 2009. Data for the study was collected from Kenya National Bureau of Statistics, Central Bank of Kenya and International Monetary Fund Data Base by taking monthly frequency. The study found that RER was very volatility for the entire study period. Kenya’s RER generally exhibited a appreciating and volatility trend, implying that in general, the country’s international competitiveness deteriorated over the study period. The RER Volatility reflected a negative impact on economic growth of Kenya.

Suggested Citation

  • Danson Musyoki & Ganesh P. Pokhariyal, 2012. "The impact of real exchange rate volatility on economic growth: Kenyan evidence," Business and Economic Horizons (BEH), Prague Development Center, vol. 7(1), pages 59-75, June.
  • Handle: RePEc:pdc:jrnbeh:v:7:y:2012:i:1:p:59-75
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    Citations

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    Cited by:

    1. Fourie, Justin & Pretorius, Theuns & Harvey, Rhett & Henrico, Van Niekerk & Phiri, Andrew, 2016. "Nonlinear relationship between exchange rate volatility and economic growth: A South African perspective," MPRA Paper 74671, University Library of Munich, Germany.
    2. repec:ebl:ecbull:eb-17-00557 is not listed on IDEAS

    More about this item

    Keywords

    Real exchange rate; nominal exchange rate; real effective exchange rate; nominal effective exchange rate; volatility; GARCH;

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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