| dc.description.abstract | Exchange rate policy is considered as one of the powerful tools of economic regulation.
The BOP is a record of all the transactions between the residents of the economy and the
rest of the world over a period of time. The objective of this study was to determine the
relationship between exchange rate volatility and BOP in Kenya. The study adopted a
quantitative comparative design to determine the relationship between the two variables.
The study used data from financial market players and regulators, that is CBK, CMA,
NSE, banks, insurance companies, mutual and pension funds and importers/exporters.
From the analysis, the exchange rate affects the prices at which a country trades with the
rest of the world and is important for economic analysis and policy formulation. The
study concludes that apart from the exchange rates herein discussed, there are other
factors having greater influence on the levels of BOP. The study recommends that in
Kenya, BOP is an important component of development because the country is a net
importer. The country requires capital equipment which consumes a considerable amount
of foreign currency compared to her exports. This study recommends proper policies to
maintain stable exchange rates as they play an important role in determining the demand
for and supply of both imports and exports. It is through exports that the country earns
foreign exchange. The study further recommends that the government to promote the
export which earns the country foreign exchange which can then be used to payoff
imports which affects the BOP. The study also recommends that the government provides
relevant structures and environment for the smooth operation of import export market in
the country. | en_US |
