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Measuring volatility spill-over effects of crude oil prices on Ghana’s exchange rate and stock market between 1991 and 2015

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  • Zankawah, Mutawakil M.

    (Kingston University London)

  • Stewart, Chris

    (Kingston University London)

Abstract

This paper examines the shock spill-over and volatility spill-over effects from crude oil prices to the Ghana exchange rate and the Ghana stock market index. We employ the multivariate GARCH BEKK and TBEKK models using monthly data from January 1991 to December 2015. We address two central issues. First, whether crude oil price movements affect the Ghana exchange rate and the Ghana stock market. Second, whether the crude oil price effect depends on the treatment of crude oil prices as exogenous or endogenous. Our findings indicate that world crude oil prices have significant spill-over effects on the exchange rate, and this result is unaffected by the treatment of world crude oil prices as exogenous or endogenous. However, the relationship between crude oil prices and the Ghana stock market depends on whether the crude oil price is exogenous or endogenous. The implication of these results is that internationally diversified portfolio investors in Ghana should use hedging strategies such as currency forwards, futures, and options to protect their investments from exchange rate risk emanating from oil price shocks. The government should also encourage the use of renewable energy such as solar to help reduce the country’s dependence on oil.

Suggested Citation

  • Zankawah, Mutawakil M. & Stewart, Chris, 2019. "Measuring volatility spill-over effects of crude oil prices on Ghana’s exchange rate and stock market between 1991 and 2015," Economics Discussion Papers 2019-1, School of Economics, Kingston University London.
    • Handle: RePEc:ris:kngedp:2019_001
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    References listed on IDEAS

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    Cited by:

    1. Parul Bhatia, 2021. "Sustainability Of Exchange Rates And Crude Oil Prices Connection With Covid-19: An Investigation For Brics," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 5, pages 19-29, October.
    2. Le Thi Minh Huong, 2020. "The Role of World Oil Price in the Movements of the Asian Stock Market," International Journal of Innovation and Economic Development, Inovatus Services Ltd., vol. 6(2), pages 7-18, June.

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    More about this item

    Keywords

    Ghana; exchange rate; stock markets; oil prices; exogeneity; shock and volatility spill-overs; system GARCH-TBEKK model.;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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