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September 10, 2025Journal of EconomicsOpen Access

Macroeconomic Drivers of Exchange Rate Volatility: Evidence from Kenya

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Authors

JKJoseph Ngigi Kinuthia

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Overview

Analysis identifies key macroeconomic factors influencing exchange rate volatility in Kenya, suggesting targeted monetary policies.

Key Points

  • Increased foreign direct investment significantly reduces exchange rate volatility by 36.4%, highlighting its importance.
  • Long-run estimates indicate inflation and money supply increase exchange rate volatility by 55.2% and 239.7%, respectively.
  • Short-run effects show a 1% rise in government spending reduces volatility by 90.65%, emphasizing fiscal policy's role.
  • Analysis using GARCH reveals that exchange rate markets are not random, indicating structured volatility in response to macroeconomic changes.

Cite This Study

Joseph Ngigi Kinuthia (2025) studied this question.

synapsesocial.com/papers/68c192659b7b07f3a06174cfhttps://doi.org/10.53819/81018102t4342
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