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The Effect of Exchange Rate Fluctuation on the Performance of Manufacturing Firms: An Empirical Evidence from Ghana

Author

Listed:
  • Emmanuel Buabeng

    (Department of Economics, Kwame Nkrumah University of Science and Technology)

  • Enock Kojo Ayesu

    (Department of Economics, Kwame Nkrumah University of Science and Technology)

  • Opoku Adabor

    (Department of Economics, Kwame Nkrumah University of Science and Technology)

Abstract

This study examines the effect of exchange rate fluctuations on the performance of manufacturing firms in Ghana for the period 1990 to 2018. The study uses the bounds test approach to cointegration within the framework of autoregressive distributed lags model as the estimation strategy. The results reveal that exchange rate and monetary policy rate has a negative and significant relationship with manufacturing firm performance. It was also found that inflation, trade openness, and investment have significant positive relation with manufacturing firm performance in Ghana. Based on the negative and significant relationship with exchange rate and manufacturing firm performance, it is recommended that government and private partnership should ensure effective management of the exchange rate fluctuation and also encourage manufacturing firms to patronize locally made capital goods for their production in the face of a depreciating exchange rate. Further, the study recommends that monetary authorities should reduce interest rate to increase investment by firms. This will enhance manufacturing firms’ performance.

Suggested Citation

  • Emmanuel Buabeng & Enock Kojo Ayesu & Opoku Adabor, 2019. "The Effect of Exchange Rate Fluctuation on the Performance of Manufacturing Firms: An Empirical Evidence from Ghana," Economics Literature, WERI-World Economic Research Institute, vol. 1(2), pages 133-147, December.
    • Handle: RePEc:ana:elitjr:v:1:y:2019:i:2:p:133-147
    DOI: 10.22440/elit.1.1.4
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    References listed on IDEAS

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    Cited by:

    1. Opoku Adabor & Eric Fosu Oteng-Abayie & Emmanuel Buabeng, 2023. "The impact of foreign direct investment on the growth of the manufacturing sector: exploring the role of institutional quality in Ghana," SN Business & Economics, Springer, vol. 3(1), pages 1-25, January.
    2. Adabor, Opoku, 2023. "The effect of financial development on natural gas resource rent in Ghana," Resources Policy, Elsevier, vol. 83(C).

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    More about this item

    Keywords

    Exchange rate; manufacturing firms’ performance; ARDL; Ghana;
    All these keywords.

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D20 - Microeconomics - - Production and Organizations - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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