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Relationship between Exchange Rate Volatility and Interest Rates Evidence from Ghana

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  • Sarpong Mohammed
  • Abubakari Mohammed
  • Edward Nketiah-Amponsah
  • Aviral Tiwari

Abstract

This paper examines the effect of interest rates on exchange rate volatilities in Ghana. It utilizes the Quarterly Time Series dataset spanning 2000 Quarter 1 to 2017 Quarter 2 and the Autoregressive Distributed Lag model as well as the Vector Error Correction Model to investigate the long-run and short-run relationships between the variables. The results showed that in the long-run model, exchange rate volatility was seen to be influenced by money supply, inflation, Central Bank’s policy rate, and the Ghana Stock Exchange composite index. However, in the short-run model, exchange rate volatility was found to be significantly influenced by its past values and the Central Bank’s policy rate.

Suggested Citation

  • Sarpong Mohammed & Abubakari Mohammed & Edward Nketiah-Amponsah & Aviral Tiwari, 2021. "Relationship between Exchange Rate Volatility and Interest Rates Evidence from Ghana," Cogent Economics & Finance, Taylor & Francis Journals, vol. 9(1), pages 1893258-189, January.
    • Handle: RePEc:taf:oaefxx:v:9:y:2021:i:1:p:1893258
    DOI: 10.1080/23322039.2021.1893258
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    Cited by:

    1. Emmanuel Afuecheta & Idika E. Okorie & Saralees Nadarajah & Geraldine E. Nzeribe, 2024. "Forecasting Value at Risk and Expected Shortfall of Foreign Exchange Rate Volatility of Major African Currencies via GARCH and Dynamic Conditional Correlation Analysis," Computational Economics, Springer;Society for Computational Economics, vol. 63(1), pages 271-304, January.

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