A model for inflation dynamics in Kenya

Abstract

This paper analyzes the dynamics of inflation in Kenya between 1997 and 2013. The study is done by developing an empirically constant Vector Error Correction Model (VECM). The study finds out that exchange rates and money supply have a long-run effect on inflation dynamics in Kenya. On the other hand, money supply and food prices have short-run effects on inflation. The study uses data from the Kenya National Bureau of Statistics.