| dc.description.abstract | A monetary model within the modern quantity theory tradition(monetarist proposition)
is developed which is then used to test the relevance of the monetary approach to the balanceof-
payments adjustments using a framework test analysis,the exchange market pressure model
on Kenya's experience during the period 1967-1990.
The findings of the study revealed that the model was satisfactory and fulfilled the
objectives of the study.The estimated model,despite all its imperfections was found to trace
the turning points of the exchange market pressure satisfactory, indicating the model to be
valid.The general analysis of the estimation results showed that the coefficients had the
expected signs and three were found to be significant at the five per cent level of
significance.The model gave a reasonably high R2 and F-statistic was highly significant.The
model passed the diagnostic test indicating the results to be representative of the data used
and the model to be valid. In a nutshell the results of the study supports the monetarist
proposition to the balance of payments in Kenya. This result support the findings of Grubel
and Ryan (1979).
The study found monetary factors to be significant in explaining the exchange market
pressure,implying the possibility of conducting stabilization policies through better
management of the country's monetary affairs and is supportive of the monetary approach to
the balance of payments adjustment,blaming the persistent payments imbalances largely on
the excessive expansionary monetary policy.
The paper emphasise on the proper domestic management of monetary affairs by the
monetary authorities,especially domestic credit creation in their attempts in achieving balance
of payments equilibrium.These policies should be accompanied by other measures to ensure
smooth adjustment of the country' performance.The weaknesses of the study are also suggested | en |
