The Relationship Among Real Exchange Ra Te, Current Account Balanceand Real Income In Kenya

ABSTRACT Persistent current account deficit is a chronic problem in many developing countries including Kenya. In an attempt to understand disequilibria dynamics in Kenya, this study sought to investigate the effect of real exchange on current account balance and additionally investigate whether the rate of import growth in Kenya is consistent to balanced economic growth as stipulated in Thirlwall law. The study is based on two main theories, the neoclassical elasticity approach and balance of payment constraint model. The former contend that balance of payment is influenced by the nature of …