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An analysis of export, import and exchange rate oscillation in Ghana

Author

Listed:
  • Peter Nuhu

    (Parliament of Ghana, Parliament House)

  • Dramani Bukari

    (De Montfort University)

Abstract

Since deregulation of the currency market in 1986, the Ghanaian economy has been bedevilled with persistent depreciation of the Cedi; forcing currency redenomination in 2007. The Ghana Cedi (GH¢) which traded at 0.94 to the US Dollar (USD) immediately after the redenomination has since lost so much value, and currently trades at almost GH¢6 to the USD. While the relationship between exports and import, and currency volatility is theoretically established, the empirical relationship has been varied and observed to be country-specific as well as skewed in favour of currency variation shocks to trade. This study used econometric modelling to assess the reverse i.e., impact of exports and imports on exchange rate in Ghana using monthly data from 2005M1-2019M3. The results show that while merchandise exports impact real effective exchange rates negatively, merchandise imports impact it positively. Notwithstanding that both were observed to be persistent, the magnitude of their impact on exchange rate differ, with import shocks being steeper than export shocks. The study concludes that for an import-dependent economy such as Ghana, imports may not necessarily occasion negative outcomes on REER, since majority of imports also serve as inputs into major production processes.

Suggested Citation

  • Peter Nuhu & Dramani Bukari, 2021. "An analysis of export, import and exchange rate oscillation in Ghana," International Journal of Economic Policy Studies, Springer, vol. 15(2), pages 301-327, September.
    • Handle: RePEc:spr:ijoeps:v:15:y:2021:i:2:d:10.1007_s42495-021-00060-7
    DOI: 10.1007/s42495-021-00060-7
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