$20 Bonus + 25% OFF
Securing Higher Grades Costing Your Pocket? Book Your Assignment at The Lowest Price Now!


Discuss about the misalignment of the Exchange Rate of Kenya.



In recent times, an understanding of the real exchange rate (RER) is important because it helps to understand the reason for uneven development in the economy of the country. It can be seen that due to prolonged misalignment of exchange rate in Latin America and Africa the growth rate have been slow. On the other hand, in Asia due to judicious macroeconomics, exchange rate and trade it has been able to maintain growth.

Area of study

The misalignment in the stable exchange rates and adjustable systems indicates that the policies are fundamentally poor. This poor policy prevents the exchange rate fundamental adjustments though the fundamental of the economy has changed. In case of floating exchange rate the main reason for the misalignments are the speculations that moves the exchange rate more than in compared to change in the economic fundamentals (Alagidede & Ibrahim, 2016). The growth of the economy is influenced by the Real Exchange rate through different ways. The exchange rate influences the foreign and domestic investment. This influences the capital accumulation of the economy as a result effecting the overall economic growth. The area of the study in the research is to assess the impact of currency misalignment in economic growth of Kenya.


Background of the study

In the period of 1966-1992 during the period of fixed exchange rate regime the developing country like Kenya has to frequently devalue the currency so that the negative effect that RER volatility has on the economy could be reduced. In 1993, the introduction of floating exchange rate was an important step to eliminate the RER volatility. However, there is no evidence to suggest that the liberalization of exchange rate markets have achieved its objectives (Ali, 2015).

In the developing countries like Kenya, the policy decisions for exchange rates are very sensitive and controversial. The change in exchange rate policy requires structural transformation and domestic adjustment. The change in policy has short-term effect on price and demand and this is regarded as damaging the economy (Karanja, 2016). The role of the RER on the movement of the trade balance is much debated. However, the economists does not persuasively answers whether a country should allows its currencies to be floating. In the developing countries, the decision regarding the foreign exchange policy is regarded as one of the most important policy decision that affects the economic growth.

Statement of the problem

The exchange rate is referred to as the key macroeconomic variable. It plays an important role in the transaction between the open economies. The relationship between the theoretical concept and the empirical application of the exchange is not straight forward and simple. There are two theoretical views about the effect of the exchange rate fluctuations on the output. The first view is that if the exchange rate of the domestic currency appreciates then the cost of import will reduce as a result the output will increase (Cheung & Fujii, 2014). The second view is that exchange rate appreciation reduces the price competitiveness of the domestic products internationally. This in effect reduces the accumulated demand of the product hence the output is reduced. This two conflicting views creates an empirical issues. Therefore, an empirical test for growing economies like Kenya is necessary. Many literatures highlight the effect of exchange rate fluctuation on the growth of the economy. However, studies that specifically focuses on the economy of Kenya and the impact that the exchange rate fluctuation have on the economic growth of Kenya is very rare (Nyamweya & Ali, 2016). 


Objective of the study

The main objective of the research is to study the misalignment of the exchange rate of Kenya and the effect it has on the economic growth of Kenya. The specific objective of the research are listed below:

  • To review the exchange rate policies and the macro economic performance of the economy;
  • The examination of the effect that the REM has on the economic growth of Kenya;
  • To provide recommended policies based on the study;

Therefor it can be seen that this research has a much wider objectives. This study will help the policymakers to develop appropriate policies so that the situation of economic growth can be improved.


In this case, the research aims to prove the Hypothesis that the exchange rate misalignment affects the economic performance of Kenya that is measures in terms of Gross domestic product. The null hypothesis in this research is that the economic performance of Kenya is not affected by the fluctuation in the exchange rate.

Literature review

Kenya is a developing country in Africa. The real gross domestic product of Kenya has been $55.1 billion in 2013, $61.4 in 2015 and $63.4 billion in 2016. It can be seen that the economy is constantly and steadily growing.   The economy of the country is mainly dependent on the agriculture and the tourism sector. The country has faced various drought post financial crisis but since the year 2012, the economy of Kenya has made tremendous recovery (Agbeja, 2016).


In order to analyze the impact of exchange rate on GDP the three theoretical models have been applied.  The first model is the absorption approach and monetary approach that focuses on the macroeconomics links, identities and not the microeconomic relationship as provided in the approach of elasticity. In this approach it is implied that if the domestic growth exceeds the domestic absorption then only can trade account improve. Therefore it can be seen that devaluation increases the trade balance (Iyke & Odhiambo, 2015).

The second approach is the monetary approach and it regards balance of payment as a monetary phenomenon. In this case, it can be seen that the devaluation in currency causes improvement in the balance of payment by increasing the domestic price and decreasing the supply of real money.

The third approach is the elasticity approach. In this approach, it can be seen that the elasticity is mainly based on the variant of Bickerdike – Robinson Metzler (BRM) condition and the simplified conditions provided in simplified Marshall-Lerner (ML). The BRM provides the necessary conditions related to demand of import, size of import, demand of export and supply elasticity of export that improves the balance of trade of the country. The devaluation of currency effects the relative price of export and import. This will helping promoting growth and reduce the volume of imports (Eregha et al., 2016).

Theoretical framework

The neoclassical growth theory is the basis on which the modelling of the research is conducted. In this model the variables that are used represents the structural policy that are in place. It is provided that the in order to maintain the price stability the rate of inflation is included in the growth model (Pundo, M., & Ganesh, 2014).


Research design, methodology and procedure

In this section, the research methodology that is performed in this paper is discussed. The research design is a detailed plan that indicates the method that will be used for analyzing and collecting data. The research design are in line with the research question and objective of the study. The sample is selected for the study from defined population. The data collection should be done from reliable source and analysis should be done of that data (Gouidar & Nouira, 2014).  


The above discussion provides the details concept related to exchange rate and its effect on the economy of Kenya. It can be said that the above paper has provided sufficient information for providing the concept for further research.



Agbeja, O., Adelakun, O. J., & Udi, E. E. (2016). Empirical Analysis of Counterparty Risk and Exchange Rate Risk Management on the Performance of Deposit Money Banks in Nigeria (2009-2013). Journal of Accounting and Finance, 16(2), 106.

Alagidede, P., & Ibrahim, M. (2016). On the causes and effects of exchange rate volatility on economic growth: evidence from Ghana. Journal of African Business, 1-25.

Ali, A. S. (2015). Effects of Foreign Exchange Rate on Foreign Trade In Financial Performance of the Agricultural Sector in Kenya: A Case Study of Vipingo Sisal Estate. International Journal of Finance and Accounting 4 (6) 1, 19.

Cheung, Y. W., & Fujii, E. (2014). Exchange Rate Misalignment Estimates—Sources Of Differences. International Journal of Finance & Economics, 19(2), 91-121.

Eregha, P., Ndoricimpa, A., Olakojo, S., Nchake, M., Nyang'oro, O., & Togba, E. (2016). Nigeria: Should the Government Float or Devalue the Naira?. African Development Review, 28(3), 247-263.

Gouidar, A., & Nouira, R. (2014). The Impact of Misalignment on FDI in the Developing Countries. International Journal of Economics and Financial Issues, 4(4), 784.


Karanja, A. W. (2016). Strategies to improve performance adopted by social enterprises in Kenya (Doctoral dissertation, University of Nairobi).

Nyamweya, L. N., & Ali, I. (2016). Determinants of Hedging Foreign Currency Risk in Kenya: A Survey of Tea Exporting Companies in Mombasa County. Imperial Journal of Interdisciplinary Research, 2(6).

Pundo, M., & Ganesh, P. P. (2014). The Impact of Real Exchange Rate Misalignment on Economic Growth; Kenyan Evidence.

Download Sample

Get 100% money back after download, simply upload your unique content* of similar no. of pages or more. We verify your content and once successfully verified 100% value credited to your wallet within 7 days.

Upload Unique Document

Document Under Evaluation

Get Credits into Your Wallet

*The content must not be available online or in our existing Database to qualify as unique.

Cite This Work

To export a reference to this article please select a referencing stye below:

My Assignment Help. (2018). Exchange Rate Of Kenya. Retrieved from

"Exchange Rate Of Kenya." My Assignment Help, 2018,

My Assignment Help (2018) Exchange Rate Of Kenya [Online]. Available from:
[Accessed 15 July 2020].

My Assignment Help. 'Exchange Rate Of Kenya' (My Assignment Help, 2018) <> accessed 15 July 2020.

My Assignment Help. Exchange Rate Of Kenya [Internet]. My Assignment Help. 2018 [cited 15 July 2020]. Available from: has become one of the leading assignment help provider in New York City and Boston. We provide top class auditing assignment help. Not only auditing, but we also cover more than 100 subjects and our writers deal with all types of assignments with utmost expertise. To make writing process faster and accurate, we have segmented our assignment experts' teams as per their expertise on writing different types of assignments. We guaranteed that students who buy our assignment online get solutions worth their investment.

Latest Finance Samples

ACC3201 Accounting Information Systems

Download : 0 | Pages : 5
  • Course Code: ACC3201
  • University: Edith Cowan University
  • Country: Australia

Answer: Introduction  The main aim of this report is to understand the concept of financial analysis of the company. In this paper, the financial and non-financial analysis will be done on five firms in order to select one for investment. In order to examine the financial and non-financial data, Wesfarmers, Woolworths, BHP Billiton, Rio Tinto, and Santos have been taken into consideration. All these companies are listed in Australian Sto...

Read More arrow Tags: Australia 34 accounting information systems Edith Cowan University 

BE314 Financial Modelling

Download : 0 | Pages : 10
  • Course Code: BE314
  • University: University Of Essex
  • Country: United Kingdom

Answers: Introduction One of the major responsibilities of the Agri-Food and Veterinary Authority of India is to supervise and coordinate the production of all the imported agricultural productions of India. Thus, the director of the company is interested to identify and analyse the issues that are related to the economy of rice. Nine major rice brands have been considered for the study. The brands of rice are stored in stores of New Delhi an...

Read More arrow

BAO5534 Business Finance

Download : 0 | Pages : 9
  • Course Code: BAO5534
  • University: Victoria University
  • Country: Australia

Answers: Introduction The managers of the entity are accountable for the conduct of the business operations in a manner that leads to the wealth maximization of the shareholders as well as the consideration of the interests of the other stakeholder groups within the business entity. Further to note, that business conduct within an organisation involves undertaking of varied strategic decisions in the areas of the operating, investing and fina...

Read More arrow Tags: Australia 34 Business finance Victoria University 

FIN 200 Business Finance And Group Assignment

Download : 0 | Pages : 9
  • Course Code: FIN 200
  • University: University Of Phoenix
  • Country: United States

Answer: 1.1 Depicting the monthly payment: Particulars Value Loan amount  $ 20,000,000 Tenure 120 Interest rate 0.67% Monthly payment  $ 242,655 1.2 Depicting how much is the first payment interest: Particulars Value Loan amount  $ 20,000,000 Interest rate 0.67% First payment is interest  $ ...

Read More arrow

HI5002: Finance For Business Analyse

Download : 0 | Pages : 7

Answer: Introduction  In this report, financial analysis of Lefroy exploration limited has been taken into consideration. There are several financial analysis tools that have been taken to analysis the performance of company such as ratio analysis, bottom up analysis and share price movement analysis. This financial analysis of Lefroy exploration limited will help in evaluating the business performance of company. It will help investors ...

Read More arrow

Save Time & improve Grade

Just share Requriment and get customize Solution.

We will use e-mail only for:

arrow Communication regarding your orders

arrow To send you invoices, and other billing info

arrow To provide you with information of offers and other benefits




Overall Rating



Our Amazing Features


On Time Delivery

Our writers make sure that all orders are submitted, prior to the deadline.


Plagiarism Free Work

Using reliable plagiarism detection software, only provide customized 100 percent original papers.


24 X 7 Live Help

Feel free to contact our assignment writing services any time via phone, email or live chat.


Services For All Subjects

Our writers can provide you professional writing assistance on any subject at any level.


Best Price Guarantee

Our best price guarantee ensures that the features we offer cannot be matched by any of the competitors.

Our Experts

Assignment writing guide
student rating student rating student rating student rating student rating 5/5

265 Order Completed

97% Response Time

Ken Campbell

MSc in Electrical Engineering

Wellington, New Zealand

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

1896 Order Completed

95% Response Time

Herman Berens

MSc in Psychology

London, United Kingdom

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

285 Order Completed

99% Response Time

Eugene Baranowski

MBA in Supply Chain

London, United Kingdom

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 4/5

2594 Order Completed

95% Response Time

Michael Johnson

Masters of MSc in Economics

Washington, United States

Hire Me

FREE Tools


Plagiarism Checker

Get all your documents checked for plagiarism or duplicacy with us.


Essay Typer

Get different kinds of essays typed in minutes with clicks.


GPA Calculator

Calculate your semester grades and cumulative GPa with our GPA Calculator.


Chemical Equation Balancer

Balance any chemical equation in minutes just by entering the formula.


Word Counter & Page Calculator

Calculate the number of words and number of pages of all your academic documents.

Refer Just 5 Friends to Earn More than $2000

Check your estimated earning as per your ability




Your Approx Earning

Live Review

Our Mission Client Satisfaction



User Id: 283077 - 15 Jul 2020


student rating student rating student rating student rating student rating

Paper was written well and completed before my deadline, so I was able to review it with time.


User Id: 459660 - 15 Jul 2020


student rating student rating student rating student rating student rating

The expert read through the document I provided carefully and gave great details on the proposal. A job well done.


User Id: 332269 - 14 Jul 2020


student rating student rating student rating student rating student rating

Excellent work. Good job. I really Satisfied from your work. I appreciate for your efforts.


User Id: 451973 - 14 Jul 2020


student rating student rating student rating student rating student rating
callback request mobile
Have any Query?