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An Assessment Of Exchange Rate Misalignment In Kenya

Di: Henry

Since exchange rate misalignment captures the distortionary effects of inappropriate macroeconomic policies in the main, my hypothesis is that resilient and less fragile states cope better with macroeconomic imbalances making misaligned exchange rates less likely to have serious effects on growth in such countries. The influence of exchange rate signals in an economy is very powerful and often pervasive. Moreover, sustained real exchange rate overvaluation, will, by distorting resource allocation away from productive activities, eventually lead to drastic adjustments of relative prices and reduction of aggregate economic growth. However, the direct theoretical and empirical link between Generalized Method Moments (GMM) technique was used to assess the impact of the real exchange rate misalignment on economic growth for the period of January 1993 to December 2009. Data for the study was collected from Kenya National Bureau of Statistics, Central Bank of Kenya and International Monetary Fund Data Base by taking monthly frequency.

In terms of misalignment, the exchange rate is overvalued to a maximum of 5.9 percent and undervalued up to 5.2 percent. The estimated misalignment hurts imports but has a positive, statistically The estimated exchange rate misalignment levels from the three approaches misalignment hurts imports point to the same direction. The current research obtains an average exchange rate gap for the three models of 13.4 percent, implying that Rwandan currency is overvalued in real efective terms by 13.4 percent, pointing to adverse efects on the external competitiveness.

(PDF) Fundamentals and the Equilibrium of Real Exchange Rate of an ...

Abstract This paper examines the real exchange rate misalignment in Kenya using quarterly data over the period 2000 – 2014. The Behavioral Equilibrium Exchange Rate (BEER) approach to determine the extent of exchange rate misalignment is adopted.

What is Misaligned exchange rate?

Request PDF | Aid, Real Exchange Rate Misalignment, and Economic Growth in Sub-Saharan Africa | Generating sustained growth in Sub-Saharan Africa (SSA) is one of the most pressing challenges in

Abstract Purpose: This paper investigates the determinants of Kenya’s real exchange rate and determine the real exchange rate and its misalignment from the long run equilibrium level using quarterly data covering 2000 – 2016.

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Kiptuli and Ndirangu (2015) used a VECM to determine the exchange rate misalignment in Kenya from 2000-2014 and reported findings similar to the CBK (2019) in that the real exchange rate is largely driven by fundamentals. Purpose: This paper investigates the determinants of Kenya’s real exchange rate and determine the real exchange rate and its misalignment from the long run equilibrium level using quarterly data

Exchange rate serves as a barometer for the economic health of a nation, influencing various facets of its economy, especially international trade (Edwards & Cabezas, 2022). The inherent volatility of exchange rates can pose a significant risk to global trade dynamics by escalating transaction costs and potentially curtailing trade interests, resulting in

Towards the end, this paper analyzes the trajectory of RMB exchange rate misalignment since 1978, and makes an assessment of RMB exchange rates. The author suggests gradual reforms in exchange rate policies. PDF | On Apr 14, 2005, Justin Michael Dubas published Exchange Rate Misalignment: Causes and Consequences | Find, read and cite all the research you need on ResearchGate Abstract Exchange rate policy is regarded as a critical macroeconomic policy. Especially the misalignment of exchange rates is significantly impact on imported goods, particularly oil imports, which ultimately effect external and internal imbalances.

REAL EXCHANGE RATE EQUILIBRIUM AND MISALIGNMENT IN KENYA

Downloadable! This paper examines the real exchange rate misalignment in Kenya using quarterly data over the period 2000 – 2014. The Behavioral Equilibrium Exchange Rate (BEER) approach to determine the extent of exchange rate misalignment is adopted.

I then insert this variable and its interaction with state fragility in a growth speci-fication. In line with my hypothesis, results from the system generalised method of moments and data on 13 sub-Saharan countries observed between 2009 and 2018 show a significantly negative effect of exchange rate misalignment on growth that increases with state fragility. Based on this During an economy is the era of the fixed exchange rate regime, that covered the period of 1966-92, Kenya, like many developing countries, had to frequently devalue its currency in an attempt to reduce the negative effects that RER misalignment had on its economy. The adoption of a floating exchange rate system in 1993 marked the climax of efforts to make the RER more aligned to the market

The findings of this study reveal a negative association between exchange rate uncertainty and short-term economic growth, while the long-term effects yield mixed results. Moreover, we observe that higher exchange rate misalignment The paper seeks to explain the extent of real exchange rate misalignment, defined as its deviation from its equilibrium level. It enlarges the traditional analysis, which focuses mainly on to consider the role of nominal exchange rate regimes, to consider the role of the quality of institutions and financial development. Since adopting a flexible exchange regime in June 1995, Kenya has experienced episodes of elevated exchange rate volatility and misalignment, see for instance, [7], and it will be informative knowing the role net short term capital inflows play in determination of the Kenya Shilling exchange rate.

This paper investigates the effects of real exchange rate misalignment (REM) on economic growth in Kenya over the period 1964-2009. The real exchange rate misalignment is defined as the difference between the equilibrium exchange rate and the actual real exchange rate (RER). 25 24 23 Introduction 26 The assessment of equilibrium values of the real exchange rate (RER) has s been an important issue in internation 28 current context of global imbalances. Indeed, of loss of since the mid of the 1990s – the 29 beginning of a period characterized by the increasing of emerging countries to Abstract The exchange rate is an important variable in international trade because a country’s competitiveness is determined by the expectations on how trade reacts to its movements. To orient the economy outwards, Kenya has pursued various measures from the 1990s to the 2000s. Kenya also signed up for nonreciprocal trade with the European Union

The exchange rate is an important variable in international trade because a country’s competitiveness is determined by the expectations on how trade reacts to its movements. To orient the economy outwards, Kenya has pursued various measures from the 1990s to the 2000s. Kenya also signed up for nonreciprocal trade with the European Union under the Cotonou was collected from The effective exchange rate misalignment is defined as the deviation of the real effective exchange rate from its equilibrium level. An overvaluation of a currency was often shown to be a source of loss of external competitiveness especially in developing countries such as Tunisia where the external demand for domestic products is very price

Appendix 2 Exchange Rate Misalignment: What the Models Tell Us and Methodological Considerations Often one sees references suggesting that an exchange rate is in disequilibrium or misaligned and not at the rate “it should be” or not at a rate based on market fundamentals. Abstract In this paper, we investigate the existence and the nature of to determine real exchange rate misalignment in Organization of the Petroleum Exporting Countries (OPEC). By April 2021, in the context of long-standing deep growth shortfalls, a heavily overvalued exchange rate, an excessively loose fiscal stance, and an elevated public debt stock, Kenya’s prospects were threatened by rising global interest rates, a

During the era of the fixed exchange rate regime, that covered the period of 1966-92, Kenya, like many developing countries, had to frequently devalue its currency in an attempt to reduce the negative effects that RER misalignment had on its economy. The adoption of a floating exchange rate system in 1993 marked the climax of efforts to make the RER more aligned to the market Abstract This paper develops benchmarks to assess relative price developments from the 1990s based on the so-called behavioural equilibrium exchange rate (BEER) empirical models. Predictions from these empirical models for the determinants of real effective exchange rates allow estimating REER benchmarks consistent with the fundamentals of the economy. Abstract Purpose: This paper investigates the determinants of Kenya’s real exchange rate and determine the real exchange rate and its misalignment from the long run equilibrium level using

Generalized Method Moments (GMM) technique was used to assess the impact of the real exchange rate misalignment on economic growth for the period of January 1993 to December 2009. Data for the study was collected from Kenya National Bureau of Statistics, Central Bank of Kenya and International Monetary Fund Data Base by taking monthly frequency. Abstract In this paper, we investigate the existence and the nature of real exchange rate misalignment in Organization of the Petroleum Exporting Countries (OPEC). To suggests gradual reforms in do this we estimated a cross country basic real exchange rate determination model for 1990-2012 and extracted historic trend of misalignment. This mandate was further reinforced in Articles 76-78 of the Treaty, which respectively deal with COMESA Monetary and Fiscal Policy Harmonization, establishment of currency convertibility and formation of an exchange rate union. Based on the above mandate, the COMESA Committee of Governors of Central Banks set up a COMESA Monetary Institute (CMI). The CMI’s objective

Misaligned exchange rate refers to an exchange rate that deviates significantly from its equilibrium value, where it does not accurately reflect the underlying economic fundamentals of a country. Abstract This paper (i) investigates whether the real exchange rate in Kenya is over-valued despite the adoption of a flexible exchange rate regime since the early 1990s; and (ii) examines the relationship between the nominal and the real exchange rate and the implications for the appropriate level of the nominal exchange rate in 2012. Using quarterly data and a 1995Q4