Floating Exchange Rates, their Influence on Financial Performance on Construction Sector: The Kenyan Experience

Martin Khoya Odipo


Kenya operates under a floating exchange rate system where the exchange rate of the country is determined through forces of demand and supply for the local currency. This means that the local currency keeps fluctuating against other world currencies and for this case, the currencies of the primary market. The objectives of this study were to determine the amount of contribution the Construction Sector makes to Gross Domestic Product, whether the level of contribution is influenced by fluctuation of domestic currency in foreign exchange market, and the effect of foreign exchange rates fluctuations on profitability on Construction firms listed in The Nairobi Securities Exchange (NSE). The study used secondary data from: the NSE comprising of financial statements from these firms and the Kenya National Bureau of Statistics. The study used descriptive statistics, regression analysis and analysis of variance for the data. The sector contributes on average 4% to the Gross Domestic Product. The level of profitability depends on the variability of foreign exchange rate to the national currency

Key words: Foreign Exchange Rate Fluctuation, firms’ Profitability  and Gross Domestic Product

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