Exchange Rate Pass-through Dynamics: VAR Evidence for Kenya

A VAR framework with exogenous variable is considered to analyse the exchange rate pass-through dynamics in Kenya. Monthly time series data from January 2006 December 2022 used. Six endogenous variables namely; US dollar rate, broad money supply, total import, 20 Nairobi stock share index, consumer price index and 91 days treasury bond sourced central bank of Kenya were considered. Global food oil prices per barrel statista Murban Adnoc respectively are variables. Unit root test first performed for stationary line assumptions. Oil import only variables, while other integrated order 1. Secondly, a VARX (2,0) estimated, which statistically significant at 5% level. Thirdly, Granger causality performed, that provide evidence supply respect In addition, VARX(2,0) converted MA(2) develop dollars impulse response function. There exist high level volatility all Finally, forecast error variance decomposition following Cholesky shows proportion explained by respectively. Kenya’s policy makers need build strong monetary control measures safeguarding performance macroeconomic indicators.