dc.description.abstract | The balance of payments is a statistical statement that summarizes transactions between
residents and non-residents during a period .While the selected macroeconomic variables
are those that are pertinent to a whole economy either at the national or regional level and
affect a large population rather than a few selected individuals. The objective of this
study was to establish the effect of the selected macroeconomic variables on balance of
payment in Kenya. This study made use of descriptive study design and used secondary
data collected from Kenya National Bureau of Statistics and the Central Bank of Kenya.
Monthly data was used in the computations. The study covered nine years starting 2006
to the year 2014, multiple linear regression used to model the relationship between the
independent variables, and a dependent variable was used by fitting a linear equation to
observed data. The Data analysis was done using Microsoft excel data analysis tool and
the presentations made using tables and figures. The findings established that there was a
direct relationship between BOP and exchange rates, BOP and interest rates, BOP and
inflation rates and BOP and public borrowing. The study findings further established that
87.8 per cent of changes in BOP were contributed by the changes in the selected
macroeconomic variables in Kenya with 12.2 per cent being contributed by other
unknown factors not considered in the study. The regression results also indicate that the
model used is very significant at 0.05 level of significance level with a p-value of 0.0000.
The study recommends that the policy makers should take keen interest on how best to
improve the value of Kenya’s export to the world; this will help bring to equilibrium the
exchange rates that play an important role in determining the balance of payments. The
government needs to increase marketing of its exports, create awareness among local
entrepreneurs of existing export market that need to be exploited while giving incentives
to local industries producing for export as well as those companies that assemble locally
which will help curb demand for imports. The study further recommends that policy
makers should come up with the best way to fund government project other than public
borrowing that has on the rise and as observed from the study it is a major contributor to
increase in BOP deficit. | en_US |