Testing the marshall-lerner condition in Kenya

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dc.creatorMudida, Robert
dc.date01/31/2013
dc.dateThu, 31 Jan 2013
dc.dateThu, 31 Jan 2013 18:09:46
dc.dateThu, 31 Jan 2013 18:09:46
dc.date.accessioned2015-03-18T11:28:49Z
dc.date.available2015-03-18T11:28:49Z
dc.descriptionNavarra Center for International Development WP-09/2012
dc.descriptionIn this paper we examine the Marshall-Lerner (ML) condition for the Kenyan economy. In particular, we use quarterly data on the log of real exchange rates, export-import ratio and relative (US) income for the time period 1996q1 – 2011q4, and employ techniques based on the concept of long memory or long range dependence. Specifically, we use fractional integration and cointegration methods, which are more general than standard approaches based exclusively on integer degrees of differentiation. The results indicate that there exists a well-defined cointegrating relationship linking the balance of payments to the real exchange rate and relative income, and that the ML condition is satisfied in the long run although the convergence process is relatively slow. They also imply that a moderate depreciation of the Kenyan shilling may have a stabilizing influence on the balance of payments through the current account without the need for high interest rates
dc.description.abstractIn this paper we examine the Marshall-Lerner (ML) condition for the Kenyan economy. In particular, we use quarterly data on the log of real exchange rates, export-import ratio and relative (US) income for the time period 1996q1 – 2011q4, and employ techniques based on the concept of long memory or long-range dependence. Specifically, we use fractional integration and cointegration methods, which are more general than standard approaches based exclusively on integer degrees of differentiation. The results indicate that there exists a well-defined cointegrating relationship linking the balance of payments to the real exchange rate and relative income, and that the ML condition is satisfied in the long run although the convergence process is relatively slow. They also imply that a moderate depreciation of the Kenyan shilling may have a stabilizing influence on the balance of payments through the current account without the need for high interest rates.
dc.formatNumber of Pages:26
dc.identifier
dc.identifier.urihttp://hdl.handle.net/11071/3437
dc.languageeng
dc.publisherSocial science research network
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dc.subjectMarshall-Lerner condition
dc.subjectfractional integration
dc.subjectfractional cointegration
dc.titleTesting the marshall-lerner condition in Kenya
dc.typeWorking Paper
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