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Exchange Rates and Economic Growth in Kenya: An Econometric Analysis

Author

Listed:
  • McPherson, M.F.
  • Rakovski, T.

Abstract

The current paper expands on an earlier DDP (No.607), which had discussed the relationship between economic growth and exchange rate in Kenya. Based on data for the period 1970 to 1996, we analyze the possible direct and indirect relationship between the real and nominal exchange rates and GDP growth. We derive these relationships in three ways: within the context of a fully specified (but small) macroeconomic model, as a single-equation instrumental variable estimation, and as a vector-autoregression model. The estimation results from the three different settings show that there is no evidence of a strong direct relationship between changes in the exchange rate and GDP growth.

Suggested Citation

  • McPherson, M.F. & Rakovski, T., 1998. "Exchange Rates and Economic Growth in Kenya: An Econometric Analysis," Papers 651, Harvard - Institute for International Development.
    • Handle: RePEc:fth:harvid:651
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    Cited by:

    1. Qaisar Abbas & Javid Iqbal & Ayaz, 2012. "Relationship Between GDP, Inflation and Real Interest Rate with Exchange Rate Fluctuation of African Countries," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 2(3), pages 132-141, July.

    More about this item

    Keywords

    EXCHANGE RATE ; INFLATION ; ECONOMIC GROWTH ; PRICES;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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