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Modelling the effect of exchange rate on inflation in Ghana

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  • Asuamah Yeboah, Samuel

Abstract

The paper examines the exchange rate-inflation nexus for Ghana during the period 1964 to 2013 using annual data. The analysis of the results performed by using the Johansen test (JH), Vector Error Correction (VECM) test, and the Ordinary least square test (OLS). The findings of the result based on the JH, and VECM tests indicate stable long run and short run link between exchange rates and inflation. The results of the OLS test indicate there is positive link between exchange rates and inflation. Policy makers should take into account the findings of the study in order to control inflation. Future studies should consider causality and structural break issues as well as panel study.

Suggested Citation

  • Asuamah Yeboah, Samuel, 2017. "Modelling the effect of exchange rate on inflation in Ghana," MPRA Paper 99395, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:99395
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    References listed on IDEAS

    as
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    5. Amit Kara & Edward Nelson, 2003. "The Exchange Rate and Inflation in the UK," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(5), pages 585-608, November.
    6. Maozu Lu & Zhichao Zhang, 2003. "Exchange rate reform and its inflationary consequences: an empirical analysis for China," Applied Economics, Taylor & Francis Journals, vol. 35(2), pages 189-199.
    7. ODUSOLA, Ayodele & AKINLO, Anthony, 2001. "Output, Inflation, And Exchange Rate In Developing Countries: An Application To Nigeria," UNDP Africa Economists Working Papers 307343, United Nations Development Programme (UNDP).
    8. Feridun, M., & Folawewo, A. O. & Osinubi, T.S ., 2005. "Monetary Policy and Macroeconomic Instability in Nigeria: A Rational Expectation Approach," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 5(2).
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    More about this item

    Keywords

    Inflation; exchange rates; money supply; long run;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • P24 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation
    • P44 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - National Income, Product, and Expenditure; Money; Inflation

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