Determinats of the current account of the balance of payments: An analysis for kenya , 1 9 7 3 - 1 9 8 8

Abstract

The study examined the relationships between major components of the current account of the balance of payments and the factors that affect them. The factors considered include domestic and foreign lncome, relative price of imports and exports, real effective exchange rate, budget deficit and foreign exchange reserves. The aim was to statistically test the importance and influence of these factors on the current account. The empirical analysis has shown that both internal and external factors are relevant in explaining the deterioration of the account during 1973-88. The deficits cannot therefore be solely attributed to any single factor. These factors must there-

fore be taken into account when designing appropriate balance of payments adjustment policies.