Abstract
This study seeks to examine the determinants of real exchange rate and its overall performance on Ghanaians economy from 1998 to 2016. The study extracted secondary data from the World Development Indicators (WDI) of the World Bank and Bank of Ghana (BoG) websites respectively. The following variables, namely trade openness, public debt, inflation, terms of trade, political stability were used as an independent variable while real exchange rate was the dependent variable. Simple linear regression model with ordinary least method (OLS), was used to analyze the results. The study revealed that trade openness and GDP are the main factors affecting exchange rate in Ghana. Also, the study finds that public debt, terms of trade, political stability had impact but were not statistically significant on real exchange rate. This study recommends Bank of Ghana put efforts to harmonize monetary policies and then proceed to connect these policies with trade and economic growth policies.
Highlights
From the 1980s, Ghana embarked on an economic recovery programme (ERP) on trade and foreign exchange liberalization where the “black market” trading was legalized into what is the foreign exchange bureaus
The data for the study analysis was retrieved from the World Development Indicators (WDI) from the World Bank with data from 1998-2016 (i.e. 19 years)
1) The study examined the development of Ghanaian foreign exchange market and the factors that influence its fluctuations
Summary
From the 1980s, Ghana embarked on an economic recovery programme (ERP) on trade and foreign exchange liberalization where the “black market” trading was legalized into what is the foreign exchange (forex) bureaus. This exchange rate management fully took shape between 1983 and 1992 from a rigidly fixed to a flexible exchange rate regime [1] [2]. A flexible exchange rate regime would eliminate the need for the politically risky and difficult devaluations [3] [4]
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