FACTORS AFFECTING EXPORT EARNINGS: A CASE STUDY OF THE FLOWER INDUSTRY IN KENYA
Abstract
The general objective of the study was to establish the factors affecting the flower export earnings in Kenya. The study used secondary data to achieve the stated research objective. The data was collected from HCDA, KNBS, KFC, and CBK. Flower export earnings was analyzed together with the Exchange rates (Kshs Vs Euro), inflation rates, foreign capital flows and volume of flower exports for the period January 2011 to December 2015. The study found out that exchange rate volatility affected the export earnings of flowers. It was identified that the two exchange rate volatility factors notably balance of payments and government debt payment affected the export earnings of flowers. The study established that the inflation rate affected the export earnings of the Kenya flowers. It was noted that the two inflation rate factors notably purchasing power and government securities issue affected the export earnings of the Kenya flowers to a large extent. Findings from the analyzed data showed that foreign capital flows affected the export earnings of the Kenya flowers. The study further identified that export volumes affected the export earnings of the Kenya flowers. Findings showed that export volumes factors notably demand for flowers and production capacity affected the export earnings of the Kenya flowers to a large extent. The study drew conclusions that the major factors affecting the flower export earnings in Kenya included; exchange rate volatility, inflation rate, foreign capital flows and export volumes. However, the it was concluded that inflation rate was the major factor affecting export earning in Kenya flower firms with a coefficient of 0.664, then followed by export volumes with a coefficient of 0.223, then exchange rate volatility with a coefficient of 0.075 and lastly foreign capital flows with a coefficient of 0.029. The study recommended that flower firms should consider exchange rate volatility when looking for exports market, changes in balance of payments and government debt payment trend should be taken into account when exporting flowers to foreign markets. The government through the central bank should employ effective strategies to control inflation and stabilize exchange rate to avoid uncertainty about potential future movements in the exchange rate and flower prices.
Key Words: Exchange Rate Volatility, Inflation Rate, Foreign Capital, Export Volumes, Export Earnings
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DOI: http://dx.doi.org/10.61426/sjbcm.v5i2.720
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