Please use this identifier to cite or link to this item: http://buratest.brunel.ac.uk/handle/2438/7085
Title: Testing the Marshall-Lerner condition in Kenya
Authors: Caporale, GM
Gil-Alana, LA
Mudida, R
Keywords: Marshall-Lerner condition;Fractional integration;Fractional cointegration
Issue Date: 2012
Publisher: Brunel University
Citation: Economics and Finance Working Paper, Brunel University, 12-22, Sep 2012
Abstract: In this paper we examine the Marshall-Lerner (ML) condition for the Kenyan economy. In particular, we use quarterly data on the log of real exchange rates, export-import ratio and relative (US) income for the time period 1996q1 – 2011q4, and employ techniques based on the concept of long memory or long-range dependence. Specifically, we use fractional integration and cointegration methods, which are more general than standard approaches based exclusively on integer degrees of differentiation. The results indicate that there exists a well-defined cointegrating relationship linking the balance of payments to the real exchange rate and relative income, and that the ML condition is satisfied in the long run although the convergence process is relatively slow. They also imply that a moderate depreciation of the Kenyan shilling may have a stabilizing influence on the balance of payments through the current account without the need for high interest rates.
URI: http://bura.brunel.ac.uk/handle/2438/7085
Appears in Collections:Economics and Finance
Publications
Dept of Economics and Finance Research Papers

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