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Interaction entre la croissance économique, l’inflation et le taux de change au kenya
[Interaction between economic growth, inflation and exchange rate in kenya]

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  • Nansha, Kevin

Abstract

The issue of the interaction between economic growth, inflation and exchange rate in Kenya, has been the subject of this paper. So,SVAR and ARDL (with bounds test cointegration) models have been used in this study. On time series covering the kenyan economy (1960 to 2020), the Granger causality test has shown that no variable in our study, significantly improves the forecasts of the others. However, the SVAR model has indicated that with theoretical short-term restrictions, a significant depreciation of the kenyan local currency by 10% would cause the kenyan inflation rate to increase by 7.38%. The ARDL model with bounds test cointegration came to a controversial conclusion. In the short run, an appreciation of the kenyan local currency by 10% would lead to a 15.18% increase in the kenyan inflation rate. In the long run, however, a 10% increase in the exchange rate would lead to a small 7.01% increase in the inflation rate in Kenya. In addition, a 10% decrease in past values (lagged by one period) of the inflation rate would cause it to increase by 4.62 % at time "t".

Suggested Citation

  • Nansha, Kevin, 2021. "Interaction entre la croissance économique, l’inflation et le taux de change au kenya [Interaction between economic growth, inflation and exchange rate in kenya]," MPRA Paper 109246, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:109246
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    References listed on IDEAS

    as
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    2. Hüseyin Şen & Ayşe Kaya & Savaş Kaptan & Metehan Cömert, 2019. "Interest rates, inflation, and exchange rates in fragile EMEs: A fresh look at the long-run interrelationships," Working Papers halshs-02095652, HAL.
    3. Hüseyin Şen & Ayşe Kaya & Savaş Kaptan & Metehan Cömert, 2019. "Interest rates, inflation, and exchange rates in fragile EMEs: A fresh look at the long-run interrelationships," Working Papers hal-02133041, HAL.
    4. ViniÌ cius de Azevedo Couto Firme & JoaniÌ lio Rodolpho Teixeira, 2014. "Index of Macroeconomic Performance for a Subset of Countries: A Kaldorian Analysis from the Magic Square Approach Focusing on Brazilian Economy in the Period 1997-2012," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(5), pages 527-542, October.
    5. Fatbardha Morina & Eglantina Hysa & Uğur Ergün & Mirela Panait & Marian Catalin Voica, 2020. "The Effect of Exchange Rate Volatility on Economic Growth: Case of the CEE Countries," JRFM, MDPI, vol. 13(8), pages 1-13, August.
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    More about this item

    Keywords

    Keywords: economic growth; inflation; exchange rate; SVAR; ARDL; Kenya;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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