Exchange Rates and the Volume of Imports in Kenya
Abstract
Finding out how Kenya's trade level and system from the perspective interact was the study's main
goal. The investigation particularly examined the connection test of exchange rate and import
volume in Kenya so that to examine the effects of intervening variables including domestic
income, terms of trade, and pricing, as well as to offer policy concerns for those variables. The
secondary data collected for the study spans the years 1980 through 2020. The UN published
directory, IFS, KNBS, global development indicators and the IMF which provided the data for the
study. The study used time series analysis (KNBS). The investigation results demonstrated that
the exchange rate affected Kenya's import volume. As the value of Kenyan shillings comparative
to the US dollar rises, so does the volume of imports. The ability of local businesses to purchase
items from other nations is implied by a growth in the value of the shilling. In contrast, a decline
in the worth of the shilling results in a decrease in the volume of imports as local businesses lose
their ability to finance the importation of goods into the nation. According to the study, terms of
trade and GDP had an impact on the connection between Kenya's import volume and the exchange
rate. When the terms of trade are advantageous, imports increase. Conversely, when the conditions
of trade worsen, export quantities decline and the value of Kenyan Shillings falls. A rising GDP
indicates a strong Kenyan shilling in relation to the US dollar, which causes imports to rise. As a
result, while creating decisions and policies, it is important to take into account both the GDP and
terms of trade give the link between the exchange rate and the volume of imports. Kenya was
therefore recommended to decrease its imports while raising its exports by depreciating its
currency. Due to the deflation of the domestic currency and the increasing competitiveness of
Kenyan goods on international markets, the amount of imports would decline. Export growth will
support the development of the nation's economy. Therefore, in order to raise inflation in the
country, the rate of currency devaluation should be maintained. The research also recommended
that Kenya's government bargain for improved terms of trade for our agricultural products with
both present and potential new markets. The Kenyan government has to reopen markets for our
items like khat and increase exports of goods with value addition. The increase in Kenya's
exchange rate should be adopted as a instrument to improve trade agreements and, as a result,
promote exports.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
- School of Economics [237]
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