An Empirical Analysis Of The Relationship Between Exchange Rates And Inflation In Kenya (1973-2014)

Abstract

This study examined the relationship between exchange rates and inflation in Kenya from an empirical perspective using time series data from the year 1973 to 2014. A VAR model was used and data analysis conducted using ADF unit root test, cointegration tests, VECM test as well as Granger causality test. The results of the data analysis revealed a positive unidirectional causality from exchange rate to inflation.