Real Exchange Rate Volatility and Exports in Kenya: 2005-2012

Manaseh Otieno Oiro

doi:doi:10.11648/j.jwer.20150405.12

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Real Exchange Rate Volatility and Exports in Kenya: 2005-2012

Manaseh Otieno Oiro

Published in Journal of World Economic Research (Volume 4, Issue 5)

Received: 3 September 2015 Accepted: 24 September 2015 Published: 19 October 2015

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Abstract

The real exchange rate has proven to be an important factor in international trade because it is expected that exports react to real exchange rate movements with respect to the characteristics of the importing and exporting countries. Exchange rate volatility increases uncertainty of profits on contracts denominated in foreign currency and subsequently dampens trade and economic growth. This study investigated how real exchange rate volatility affected exports of key Kenyan commodities to the European Union and United Kingdom, namely; tea, coffee and horticulture to the European Union. The presence of exchange rate volatility was determined using the GARCH model. A Bounds testing and Autoregressive Distributed Lag model was used to establish the presence of a long run relationship between exchange rate volatility and commodity exports. Findings revealed that exchange rate volatility affected tea exports to the UK and horticulture exports to the European Union. Foreign income played an important role in explaining tea and coffee exports to the UK and EU respectively. It is recommended that greater value addition be done to tea and coffee exports to ensure that their demand increases with increase in foreign incomes.

Published in	Journal of World Economic Research (Volume 4, Issue 5)
DOI	10.11648/j.jwer.20150405.12
Page(s)	115-131
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2015. Published by Science Publishing Group

Keywords

Trade Liberalization, Volatility, Exports

References

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Manaseh Otieno Oiro. (2015). Real Exchange Rate Volatility and Exports in Kenya: 2005-2012. Journal of World Economic Research, 4(5), 115-131. https://doi.org/10.11648/j.jwer.20150405.12

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ACS Style

Manaseh Otieno Oiro. Real Exchange Rate Volatility and Exports in Kenya: 2005-2012. J. World Econ. Res. 2015, 4(5), 115-131. doi: 10.11648/j.jwer.20150405.12

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Manaseh Otieno Oiro. Real Exchange Rate Volatility and Exports in Kenya: 2005-2012. J World Econ Res. 2015;4(5):115-131. doi: 10.11648/j.jwer.20150405.12

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@article{10.11648/j.jwer.20150405.12,
  author = {Manaseh Otieno Oiro},
  title = {Real Exchange Rate Volatility and Exports in Kenya: 2005-2012},
  journal = {Journal of World Economic Research},
  volume = {4},
  number = {5},
  pages = {115-131},
  doi = {10.11648/j.jwer.20150405.12},
  url = {https://doi.org/10.11648/j.jwer.20150405.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jwer.20150405.12},
  abstract = {The real exchange rate has proven to be an important factor in international trade because it is expected that exports react to real exchange rate movements with respect to the characteristics of the importing and exporting countries. Exchange rate volatility increases uncertainty of profits on contracts denominated in foreign currency and subsequently dampens trade and economic growth. This study investigated how real exchange rate volatility affected exports of key Kenyan commodities to the European Union and United Kingdom, namely; tea, coffee and horticulture to the European Union. The presence of exchange rate volatility was determined using the GARCH model. A Bounds testing and Autoregressive Distributed Lag model was used to establish the presence of a long run relationship between exchange rate volatility and commodity exports. Findings revealed that exchange rate volatility affected tea exports to the UK and horticulture exports to the European Union. Foreign income played an important role in explaining tea and coffee exports to the UK and EU respectively. It is recommended that greater value addition be done to tea and coffee exports to ensure that their demand increases with increase in foreign incomes.},
 year = {2015}
}

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TY  - JOUR
T1  - Real Exchange Rate Volatility and Exports in Kenya: 2005-2012
AU  - Manaseh Otieno Oiro
Y1  - 2015/10/19
PY  - 2015
N1  - https://doi.org/10.11648/j.jwer.20150405.12
DO  - 10.11648/j.jwer.20150405.12
T2  - Journal of World Economic Research
JF  - Journal of World Economic Research
JO  - Journal of World Economic Research
SP  - 115
EP  - 131
PB  - Science Publishing Group
SN  - 2328-7748
UR  - https://doi.org/10.11648/j.jwer.20150405.12
AB  - The real exchange rate has proven to be an important factor in international trade because it is expected that exports react to real exchange rate movements with respect to the characteristics of the importing and exporting countries. Exchange rate volatility increases uncertainty of profits on contracts denominated in foreign currency and subsequently dampens trade and economic growth. This study investigated how real exchange rate volatility affected exports of key Kenyan commodities to the European Union and United Kingdom, namely; tea, coffee and horticulture to the European Union. The presence of exchange rate volatility was determined using the GARCH model. A Bounds testing and Autoregressive Distributed Lag model was used to establish the presence of a long run relationship between exchange rate volatility and commodity exports. Findings revealed that exchange rate volatility affected tea exports to the UK and horticulture exports to the European Union. Foreign income played an important role in explaining tea and coffee exports to the UK and EU respectively. It is recommended that greater value addition be done to tea and coffee exports to ensure that their demand increases with increase in foreign incomes.
VL  - 4
IS  - 5
ER  -

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Author Information

Manaseh Otieno Oiro

Trade and Foreign Policy Division, Kenya Institute for Public Policy Research and Analysis, Nairobi, Kenya

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APA Style

Manaseh Otieno Oiro. (2015). Real Exchange Rate Volatility and Exports in Kenya: 2005-2012. Journal of World Economic Research, 4(5), 115-131. https://doi.org/10.11648/j.jwer.20150405.12

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ACS Style

Manaseh Otieno Oiro. Real Exchange Rate Volatility and Exports in Kenya: 2005-2012. J. World Econ. Res. 2015, 4(5), 115-131. doi: 10.11648/j.jwer.20150405.12

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AMA Style

Manaseh Otieno Oiro. Real Exchange Rate Volatility and Exports in Kenya: 2005-2012. J World Econ Res. 2015;4(5):115-131. doi: 10.11648/j.jwer.20150405.12

Copy | Download

@article{10.11648/j.jwer.20150405.12,
  author = {Manaseh Otieno Oiro},
  title = {Real Exchange Rate Volatility and Exports in Kenya: 2005-2012},
  journal = {Journal of World Economic Research},
  volume = {4},
  number = {5},
  pages = {115-131},
  doi = {10.11648/j.jwer.20150405.12},
  url = {https://doi.org/10.11648/j.jwer.20150405.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jwer.20150405.12},
  abstract = {The real exchange rate has proven to be an important factor in international trade because it is expected that exports react to real exchange rate movements with respect to the characteristics of the importing and exporting countries. Exchange rate volatility increases uncertainty of profits on contracts denominated in foreign currency and subsequently dampens trade and economic growth. This study investigated how real exchange rate volatility affected exports of key Kenyan commodities to the European Union and United Kingdom, namely; tea, coffee and horticulture to the European Union. The presence of exchange rate volatility was determined using the GARCH model. A Bounds testing and Autoregressive Distributed Lag model was used to establish the presence of a long run relationship between exchange rate volatility and commodity exports. Findings revealed that exchange rate volatility affected tea exports to the UK and horticulture exports to the European Union. Foreign income played an important role in explaining tea and coffee exports to the UK and EU respectively. It is recommended that greater value addition be done to tea and coffee exports to ensure that their demand increases with increase in foreign incomes.},
 year = {2015}
}

Copy | Download

TY  - JOUR
T1  - Real Exchange Rate Volatility and Exports in Kenya: 2005-2012
AU  - Manaseh Otieno Oiro
Y1  - 2015/10/19
PY  - 2015
N1  - https://doi.org/10.11648/j.jwer.20150405.12
DO  - 10.11648/j.jwer.20150405.12
T2  - Journal of World Economic Research
JF  - Journal of World Economic Research
JO  - Journal of World Economic Research
SP  - 115
EP  - 131
PB  - Science Publishing Group
SN  - 2328-7748
UR  - https://doi.org/10.11648/j.jwer.20150405.12
AB  - The real exchange rate has proven to be an important factor in international trade because it is expected that exports react to real exchange rate movements with respect to the characteristics of the importing and exporting countries. Exchange rate volatility increases uncertainty of profits on contracts denominated in foreign currency and subsequently dampens trade and economic growth. This study investigated how real exchange rate volatility affected exports of key Kenyan commodities to the European Union and United Kingdom, namely; tea, coffee and horticulture to the European Union. The presence of exchange rate volatility was determined using the GARCH model. A Bounds testing and Autoregressive Distributed Lag model was used to establish the presence of a long run relationship between exchange rate volatility and commodity exports. Findings revealed that exchange rate volatility affected tea exports to the UK and horticulture exports to the European Union. Foreign income played an important role in explaining tea and coffee exports to the UK and EU respectively. It is recommended that greater value addition be done to tea and coffee exports to ensure that their demand increases with increase in foreign incomes.
VL  - 4
IS  - 5
ER  -

Copy | Download