WP06/2012
Jel Classification
C22
N° Pages
27
Nominal exchange rates in Kenya. Are shocks transitory or permanent? An empirical investigation based on fractional integration
Abstract
This article deals with the analysis of several nominal exchange rates in Kenya, examining if the shocks are transitory or permanent by means of using fractional integration. The results support the view that most of the exchange rates are nonstationary and non-mean- reverting. Evidence of mean reversion is only obtained for the cases of Canada and India. Thus, shocks affecting the rates against these two currencies are expected to be transitory, disappearing in the long run. Policy implications are then derived.
Keywords
Nominal exchange rates; mean reversion