Effect of Corona-virus Disease 2019 (COVID-19) and Inflation Rate on the Foreign Exchange Rate in Kenya

Abstract

The general objective of this research was to investigate the effect of COVID-19 and Inflation rate on the Foreign Exchange rate in Kenya. Census technique was used in collecting a 263 days data from the World Health Organization, Central Bank of Kenya and the Kenya National Bureau of Statistics. Analysis of data was through quantitative techniques, inferential analysis; specifically, correlation analysis was conducted. Overall model fitness test was through F-test. The coefficients generated from the regression model were used to test the hypothesis. Correlation results indicated a significant positive relationship between COVID-19 and inflation rate against the foreign exchange rate. Hypothesis testing at 5% level of significance established a significant effect on COVID-19 and Inflation rate with the foreign exchange rate, hence rejecting H01 and H02. It was concluded that COVID-19 and Inflation rate significantly affect the Foreign Exchange rate in Kenya, hence requiring a close monitoring, proper policy formulation and mitigation measures. For further studies, we proposed that another study may be conducted to cover current emerging issues which may affect the foreign exchange rate in Kenya and the economy at large.