Browsing by Author "Ricy, Rianne Nyanchama"

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    Effects of Budget Deficits on the Exchange Rate in Kenya: 1993-2021.
    (Iosr Journal of Economics and Finance (Iosr-Jef), 2023) Ricy, Rianne Nyanchama; Mugendi, Charles
    Theexchange rate is considereda significant metric for a nation's competitivenessin the internationalmarket and economic performance in general. At the same time, the persistence and widening of the budget deficits in Kenya hasraised much concern among economists and policymakers since it determines a nation’s financial health.Raising the need to examine the connection between budget deficits and the EXR. With that being said, theories on howthe EXR is influenced by budget deficits are contradictory and despite attempts made by empirical studies tying budget deficits to theEXR,there remains to be controversy in their findings with each contention faced with a counter-argument. Therefore, this study utilizedquantitativeannual time series data spanningfrom 1993 to 2021 and the ARDL model to establishhowbudget deficitsaffect the EXR in Kenya, differentiating the indirect and direct effects,which is crucialin determination of the exact relationship between these variables. The study revealed that the budget deficit has a positive effect on the EXR. The study also revealed that the CAD and TOT have a positive effect on the EXR. However, the effect of the TOT on the EXR is insignificant. The study concluded that since budget deficits influence the movements in the EXR, there is need to keep the widening budget deficit in Kenya in check. Further, the study recommended the establishment of a regulatory framework tailored towards budget deficit reduction and debt sustainability.