IDEAS home Printed from https://ideas.repec.org/a/taf/oaefxx/v12y2024i1p2330447.html
   My bibliography  Save this article

Impact of exchange rate volatility on coffee export in Kenya

Author

Listed:
  • Richard Wamalwa Wanzala
  • Nyankomo Marwa
  • Elizabeth Nanziri Lwanga

Abstract

Ninety-five percent of Kenyan coffee is exported as green coffee in the international market in Europe. As a spot market, this presents a problem in that the currency of the foreign market differs from that of the domestic country (Kenya), resulting in an exchange rate problem. Kenya has a floating exchange rate system, which means that the country’s exchange rate is decided by the forces of demand and supply for domestic currency. This means that there is a comovement of domestic currencies against other global currencies; in this case, the currencies of Kenya’s key coffee market. Therefore, this study examines the influence of currency volatility on Kenyan coffee exports. According to recent figures from the Central Bank of Kenya, Kenya’s real exchange rate fluctuated from 2001 to 2020 and the country recorded a negative trend in coffee exports during the same period. This begs the question of whether real exchange rate volatility had an impact on coffee exports during this period. Data was sourced from the Coffee Directorate, the International Coffee Exchange, and the Central Bank of Kenya and was analyzed using the gravity model. The exchange rate volatility was estimated using Purée and Steinherr’s model. The findings show that exchange rate volatility hurts Kenyan coffee exports. Similar results were obtained through robustness checks by quantile regression. Consequently, this study advises that monetary and fiscal policy measures should be tailored to reduce exchange rate volatility, while still promoting agricultural exports and overall macroeconomic stability.One of the most contentious issues in international trade today is the impact of exchange rate volatility on imports and exports. Thus, it is important to understand how Kenya’s coffee exports are impacted by changes in exchange rates. For example, there are studies that report positive or negative effects, but there is a dearth of research on coffee exports from Sub-Saharan Africa, particularly from Kenya. The study’s conclusions suggest that Kenyan coffee exports are negatively impacted by fluctuations in exchange rates. This finding may be helpful in reevaluating macroeconomic strategies to boost agricultural exports in nations with economies that are comparable to Kenya’s.

Suggested Citation

  • Richard Wamalwa Wanzala & Nyankomo Marwa & Elizabeth Nanziri Lwanga, 2024. "Impact of exchange rate volatility on coffee export in Kenya," Cogent Economics & Finance, Taylor & Francis Journals, vol. 12(1), pages 2330447-233, December.
  • Handle: RePEc:taf:oaefxx:v:12:y:2024:i:1:p:2330447
    DOI: 10.1080/23322039.2024.2330447
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/23322039.2024.2330447
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/23322039.2024.2330447?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:oaefxx:v:12:y:2024:i:1:p:2330447. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/OAEF20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.