Rational Economic Decisions and the Current Account in Kenya

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This book models the responses of both the government and the private sector to external shocks and to each other's responses, and derives their effects on the current account of the balance of payments of Kenya. Its model represents a theoretical and econometric application of the rational, optimizing neoclassical analysis to developing economies, with appropriate modifications for the Kenyan context. The modified neoclassical analysis proves to be valid to a considerable extent for the Kenyan context and for the general context of developing countries. Among the major findings of this book are that both the government and the private sector in Kenya are responsive to exogenous shocks and the assumption of a rigid structure of the economy is not valid. The private sector further reacts to the governmental policy responses to the external shocks. The government in setting its policies must not ignore these reactions for they will dilute the intended results of the policies.

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The review of the literature
The general theoretical framework
The theoretical model and econometric estimation

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