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Interdependence of Major Exchange Rates in Ghana: A Wavelet Coherence Analysis

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  • Peterson Owusu Junior
  • George Tweneboah
  • Anokye M. Adam

Abstract

We have employed the three-dimensional continuous Morlet wavelet transform methodology to explore the co-movement amongst the returns of four major currencies in Ghana (dollar, euro, pound, and yen) for the period May 1999 to February 2018. The analysis reveals that the dynamics of the interdependence of the currencies is time-varying and heterogeneous. Our empirical findings demonstrate that the currencies are closely linked or interconnected. The lead–lag relationships between the returns of the exchange rates established that volatilities in the euro and yen significantly affect movements in the other currencies in daily and weekly exchange rate returns. The presence of lead–lag effects and stronger co-movements at short-run fluctuations may induce arbitrage and diversification opportunities to investors, albeit with limited space. The differences in the co-movements of returns and the evidence of contagion among the foreign exchange markets provide reliable incentive to the monetary authorities for unflinching strides to halt the speeding exchange rates.

Suggested Citation

  • Peterson Owusu Junior & George Tweneboah & Anokye M. Adam, 2019. "Interdependence of Major Exchange Rates in Ghana: A Wavelet Coherence Analysis," Journal of African Business, Taylor & Francis Journals, vol. 20(3), pages 407-430, July.
    • Handle: RePEc:taf:wjabxx:v:20:y:2019:i:3:p:407-430
    DOI: 10.1080/15228916.2019.1583973
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    Cited by:

    1. Kumah, Seyram Pearl & Odei-Mensah, Jones, 2021. "Are Cryptocurrencies and African stock markets integrated?," The Quarterly Review of Economics and Finance, Elsevier, vol. 81(C), pages 330-341.
    2. Boateng, Ebenezer & Asafo-Adjei, Emmanuel & Addison, Alex & Quaicoe, Serebour & Yusuf, Mawusi Ayisat & Abeka, Mac Junior & Adam, Anokye M., 2022. "Interconnectedness among commodities, the real sector of Ghana and external shocks," Resources Policy, Elsevier, vol. 75(C).
    3. Tweneboah, George & Owusu Junior, Peterson & Kumah, Seyram Pearl, 2020. "Modelling the asymmetric linkages between spot gold prices and African stocks," Research in International Business and Finance, Elsevier, vol. 54(C).
    4. Woode, John Kingsley & Owusu Junior, Peterson & Adam, Anokye M., 2024. "Dynamic interdependence structure of industrial metals and the African stock market," Resources Policy, Elsevier, vol. 88(C).
    5. Prince Osei Mensah & Anokye M. Adam, 2020. "Copula-Based Assessment of Co-Movement and Tail Dependence Structure Among Major Trading Foreign Currencies in Ghana," Risks, MDPI, vol. 8(2), pages 1-20, June.
    6. Urom, Christian, 2023. "Time–frequency dependence and connectedness between financial technology and green assets," International Economics, Elsevier, vol. 175(C), pages 139-157.
    7. Boakye, Robert Owusu & Mensah, Lord Kwaku & Kang, Sang Hoon & Osei, Kofi Acheampong, 2023. "Foreign exchange market return spillovers and connectedness among African countries," International Review of Financial Analysis, Elsevier, vol. 86(C).
    8. Siaw Frimpong, 2022. "On the Macroeconomic Conditions of West African Economies to External Uncertainty Shocks," Risks, MDPI, vol. 10(7), pages 1-27, July.
    9. Bossman, Ahmed & Agyei, Samuel Kwaku, 2022. "Interdependence structure of global commodity classes and African equity markets: A vector wavelet coherence analysis," Resources Policy, Elsevier, vol. 79(C).
    10. Adebayo Felix Adekoya & Isaac Kofi Nti & Benjamin Asubam Weyori, 2021. "Long Short-Term Memory Network for Predicting Exchange Rate of the Ghanaian Cedi," FinTech, MDPI, vol. 1(1), pages 1-19, December.

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