The impact of exchange rate volatility on flower export Earnings in Kenya

Abstract

This study looks at the relationship between Real Effective Exchange Rate Volatility and Flower export earnings in Kenya. It aims at establishing whether the relationship between these two variables is positive or negative. The data analyzed is quarterly between the years 1996 and 2013 for Kenyan flower exports and the real effective exchange rate of the US Dollar against the Kenya Shilling. The main model used in this study is the Vector Error Correction Model as used by Okoth & Suleiman (2014) in their study of the effect of exchange rate volatility on the flower export earnings in Uganda. Estimates used show that the relationship between the real effective exchange rate volatility on flower export earnings is in fact negative. This impact is in the short run meaning that the' effect is immediate.