The impact of changes in foreign exchange rates on volume of horticultural exports in Kenya

Abstract

The objective of this study was to establish whether there is a relationship between changes in foreign exchange rates and volume of horticultural exports in Kenya. To achieve this objective, monthly export values for all firms continuously involved in the production and export of horticultural crops as provided by HCDA were analysed together with the monthly exchange rates (USD to KES) obtained from Central Bureau of Statistics for the period 1st January 2001 to 31st December 2006.

The trend analysis was performed to ascertain the general movement of the volumes of exports as well as the exchange rates. Regressions were used to determine the relationship between the volume of horticultural exports and the exchange rates for the period 2001-2006. The results were presented in tables and charts.

Generally, the study found out that there was a fairly strong positive relationship between the volume of exports and the fluctuations in the exchange rate. The Pearson correlation was 0.605. This means 36.6% of variation in volume of exports is explained by fluctuations in exchange rates. It can therefore be concluded that the fluctuation in the exchange rates affects the volume of horticultural exports. The study recommends that another study be done in the same area to ascertain what other factors account for the variations in the volumes of horticultural exports.