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The effects of exchange rate volatility on foreign trade in Ghana

Author

Listed:
  • Emmanuel D.K. HAVI

    (Ghana)

Abstract

This paper examined the effect of real exchange rate volatility on the growth of export and import in Ghana. A monthly data was used. All the variables were cointegrated and vector error-correction model was used. It was found that, in the long-run, depreciation of real exchange rate, increase in volatility and increase in output growth were significant factors that increased the growth of export. Also, decrease in real exchange rate volatility and increase in industrial output growth were significant factors that can reduced the growth of import. However, in the short run, depreciation of real exchange rate and reduction in real exchange rate volatility were significant factors that can increase the growth of export. Also, depreciation of real exchange rate and reduction in real exchange rate volatility were significant factors that can decrease the growth of import. Finally, considering the directional causality, the current values of growth of export is determined by the past values of real exchange rate volatility Therefore, it was recommended that government policies that stabilized real exchange rate and reduce its volatility are to be encouraged to facilitate the growth of export and discourage the growth of import in Ghana.

Suggested Citation

  • Emmanuel D.K. HAVI, 2019. "The effects of exchange rate volatility on foreign trade in Ghana," Journal of Economics Library, EconSciences Journals, vol. 6(4), pages 267-286, December.
    • Handle: RePEc:cvv:journ5:v:6:y:2019:i:4:p:267-286
    as

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    References listed on IDEAS

    as
    1. Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-1025, July.
    2. Makin, John H, 1978. "Portfolio Theory and the Problem of Foreign Exchange Risk," Journal of Finance, American Finance Association, vol. 33(2), pages 517-534, May.
    3. Hooper, Peter & Kohlhagen, Steven W., 1978. "The effect of exchange rate uncertainty on the prices and volume of international trade," Journal of International Economics, Elsevier, vol. 8(4), pages 483-511, November.
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    Keywords

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    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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