Exchange Rate and Performance of the Residential Property Market in Kenya

Abstract

Purpose: The purpose of the study was to establish the effect of exchange rate on the performance of the residential property market in Kenya.

Methodology: The study used secondary data that was accumulated using secondary data collection sheet from first quarter of 2005 to fourth quarter of 2018. The study carried out several test statistics and diagnostic tests in order to achieve the most optimal solution. Vector error correction model and auto-regressive distributed lag model were employed to test the hypothesis in the short run and long run respectively.

Findings: Interestingly, the study results found that exchange rate had a negative effect on performance of residential properties in Kenya in the short run while a positive effect in long run was observed.

Implications: The study findings narrowed down the research gap brought about by the conflicting empirical literature though there is room for further analysis on the reasons behind this difference between short run and long run relationship of the two markets.

Keywords: Exchange Rate, Performance, Residential Property