Abstract
This study examined the impact of remittance on the real exchange rate on Ghana economic performance. The study extracted and used secondary data sources derived from the World Development Indicators (WDI) of the World Bank and Bank of Ghana websites over the period 1970-2016. Trade openness, government public debt, remittance, terms of trade, capital flow were used as independent variable and real exchange rate as the dependent variable. Using the Ordinary Least Squares (OLS) estimator, the study established that government public debt, trade openness and capital flow had significant impact on real exchange rate in Ghana. The study also established that remittance and terms of trade have no significant impact on real exchange rate. The analysis further suggests that, in the long run, a change in the real exchange rate is generally related to movement in economic fundamentals.
Highlights
Capital inflows play an important part in the economies of developing countries
Bearing in mind the major attention RER has grown over the past decades as a policy variable, this research seeks to bring out an in-depth analysis of the role of remittances in the real exchange rate dynamics in Ghana
What is least thought about is that the increasing flows of remittances into the country, even though beneficial, may have negative consequences on the economy as a whole
Summary
The major mechanisms of private capital inflows comprise foreign direct investment (FDI), employee’s remittances, and portfolio investment. These flows have tremendously increased over the past years and the composition and magnitude of the various capital flows have experienced significant changes over the past decade [1]. The dynamic studies of remittances remain one of the main components of capital flows, and are in advance prominence in the economic literature and economic study [2] These researches address a wide diversity of issues, stret-. Bearing in mind the major attention RER has grown over the past decades as a policy variable, this research seeks to bring out an in-depth analysis of the role of remittances in the real exchange rate dynamics in Ghana.
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