Dynamics of Current Account Deficit: A Kenyan Experience
Abstract/ Overview
Large and persistent current account deficits are among the most serious problems
of many developing countries. The Current Account in Kenya has continuously been in
deficit in the last three decades prompting the country to rely increasingly on risky short-term
flows to balance the accounts. This has consistently created a financing gap. The purpose of
this study was to provide empirically characterization of the dynamics of current account
deficit and other macroeconomic variables. Based on the absorption approach, the study
established the persistence and determinants of the current account deficit; Explanatory
research design was adopted. Due to the time series nature of the study, Multivariate Vector
Autoregressive, Granger causality test together with Variance decomposition and impulse
response functions were used to empirically establish the determinants and dynamics of …
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