Silas, Peter MwiathiCheboi, Austin Kiptoo2023-06-122023-06-122020Silas Peter Mwiathi and Cheboi Austin Kiptoo; (2020);Inflation, Balance of Payments and Exchange Rate in Kenya. IAR J Huma Soc Sci .1(3) 180-185.2708-6267http://ir-library.ku.ac.ke/handle/123456789/25781Research ArticleKenya has had inflat ion fluctuat ion over the over years. The CBK has always put efforts to maintain the inflat ion rate at 5% with a variat ion of 2.5%. Despite the efforts to achieve the vision 2030 goal, fluctuat ions are experienced. Exchange rate has been varying over years globally but in Kenya it has been increasingly varying. The increment in the exchange rate raises the prices levels and affects the product ion of imports. Policies on the exchange rate enhance the cont rol of inflat ion as well as making the domest ic goods compete internat ionally. Hence, the study was to establish the relat ionship between exchange rate and Inflat ion in Kenya in the short run between 2012-2018. Purchasing Power Parity was used to establish the relat ionship between inflat ion and exchange rate while the theory of absolute advantage and monetary approach was used to establish the relat ionship between exchange rate and BOP in Kenya. The data was collected from sources including CBK and KNBS, then diagnost ic test was done for stat ionarity. Granger causal ity was used to determine the monthly relat ionship between the three macroeconomic variables. The results found that the p-vale was greater than the crit ical values, hence fail to reject the null hypothesis, therefore no granger causality between inflat ion and exchange rate in the short run, indicat ing that exchange rate is not the best variable for policy implicat ion in the cont rol of inflat ionary economy. Henceforth, the government can factor other economic variables such as interest rate in short run to stabilize the variat ions in the inflat ion in Kenya.enInflationBalance of paymentsExchange Rate.Article