Data Analysis

What Happened in 1995?

I started a mini project a while ago on collecting Kenyan currency note serial numbers for retrospective study. The exercise was simple, get a note and record the value of the note, serial number and date of printing. First slice at the data brought up an oddity, in 1995 currency printing was done twice in a year, on January 1, 1995 and  July 1, 1995.  This phenomenon led to diving in more on the data and further patterns came up:

  • Production of 10 shilling note halted and replaced with a coin.
  • The 1000 shilling note was introduced.
  • A new series of serial numbers was deployed.

https://www.google.com/publicdata/embed?ds=d5bncppjof8f9_&ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_pcap_cd&scale_y=lin&ind_y=false&rdim=region&idim=country:KEN:TZA:UGA&ifdim=region&hl=en_US&dl=en&ind=false

Notes:
Double production means CBK wants more money in the market.
Introduction of 1000 shilling note and dropping of 10 shilling note indicate inflation.

In order to understand why this happened I chose to follow other similar data points. These are;

  • Forex Bureaux
  • Exchange Rate
  • Interest Rate
  • Inflation
  • GDP

Forex Bureau
In 1995, the Central Bank of Kenya (CBK) licensed the first batch of 19 forex bureau. Prior to 1995, only the CBK transacted in the  FX market (anyone traveling out of the country obtained dollars from the CBK and subsequently deposit them on re-entry to the country).  This signified an economic expansion by creation of additional jobs as well as contribution to the Exchequer.  Herein are the Bureau De Change licensed in 1995:

forex

 

Forex Exchange Rate
“SAP- induced reforms in the first quarter of 1994 instituted a free-floating exchange rate policy in Kenya, with the value of the Kenyan shilling thereafter determined by its supply and demand in international money market. Prior to the reform, the Kenyan government followed a fixed-exchange regime in which the shilling was pegged to the US dollar at a specific rate, subject to alteration only to rectify substantial distortion.”

Interest Rate
From the graph  below it can be observed that negative interest rates were once again introduced in 1995. which means you get charged an interest when you deposit cash. This is one of the government policies to encourage people to spend money instead of keeping it away for future use. Instead of earning interest on money saved you loose a certain portion of it.

interestGDP
From 1996 the nominal GDP in Kenya experience an exponential growth.

GDP

 Conclusion
The Kenyan government commenced a series of sector reforms to usher the country into a new financial age. It is my observation that if anyone needs to undertake an economic/financial analysis he/she needs to go as far back as 1995 – that’s our modern day economic ground zero.

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