Exchange Rate and External Trade Flows: Empirical Evidence of J-Curve Effect in Ghana

Ghana’s external trade has remained in perpetual deficits over the three decades alongside depreciating domestic currency. This paper therefore examines the effect of real exchange rate (RER) movements on Ghana’s external trade performance, using a battery of times series models. The study particularly assesses the validity of Marshall-Lerner Condition, the J-Curve and Kulkarni Hypotheses in the case of Ghana. The empirical analysis reveals inelastic responses of both export and import demand to changes in RER. We found a steady long run link between RER movements and Ghana’s trade balance. However, the impact of RER on Ghana’s trade balance was found to be asymmetric. Periods of minimal real depreciation (a “tranquil” regime) lend support to Marshall-Lerner Condition (MLC), the J-Curve theory and Kulkarni Hypothesis in the context of Ghana. In contrast, we found less visible evidence of J-curve for periods of excessive real depreciation (an “intemperate” regime). It is therefore critical to sustain macroeconomic stability in order to engender low and stable inflation and stable foreign exchange rates. This however requires the adoption of appropriate and coordinated monetary and fiscal policies

Exchange Rate and External Trade Flows: Empirical Evidence of J-Curve Effect in Ghana

Ghana’s external trade has remained in perpetual deficits over the three decades alongside depreciating domestic currency. This paper therefore examines the effect of real exchange rate (RER) movements on Ghana’s external trade performance, using a battery of times series models. The study particularly assesses the validity of Marshall-Lerner Condition, the J-Curve and Kulkarni Hypotheses in the case of Ghana. The empirical analysis reveals inelastic responses of both export and import demand to changes in RER. We found a steady long run link between RER movements and Ghana’s trade balance. However, the impact of RER on Ghana’s trade balance was found to be asymmetric. Periods of minimal real depreciation (a “tranquil” regime) lend support to Marshall-Lerner Condition (MLC), the J-Curve theory and Kulkarni Hypothesis in the context of Ghana. In contrast, we found less visible evidence of J-curve for periods of excessive real depreciation (an “intemperate” regime). It is therefore critical to sustain macroeconomic stability in order to engender low and stable inflation and stable foreign exchange rates. This however requires the adoption of appropriate and coordinated monetary and fiscal policies

Assessing Ghana’s Trade Competitiveness: A Computation of Multilateral Real Exchange Rate Index

We assess Ghana’s trade competitiveness against its major trading partners. In doing so, we compute the real effective exchange rate (REER) index using total trade weighted for the period 2006-2012. The paper further evaluates the volatility of REER and the extent to which variations are ascribed to either the relative price or nominal exchange rate. The findings indicate annual appreciation of the REER in 2001, 2003-2006, 2008, 2010-2011 and 2015-2016. In contrast, real depreciation was recorded for the periods 2002, 2007, 2009 and 2012-2014. These developments in the REER largely mirrored trends in Ghana’s trade balance and supports the notion that real depreciation (appreciation) improves (worsens) trade balance (trade competitiveness). We further observed a strong positive pass-through of nominal exchange rate to real exchange rate, while the impact from price differentials was relatively small. This finding suggests that despite the perceived moderate pass-through of nominal depreciation to domestic prices, dynamics in the nominal exchange rate remain critical for Ghana’s trade competitiveness. Consequently, this paper assigns higher priority to nominal exchange rate stability to attain the desired level of real exchange rate alongside moderating volatilities in other macroeconomic variables

Modelling heterogeneous speculation in Ghana’s foreign exchange market: Evidence from ARFIMA-FIGARCH and Semi-Parametric methods

In this paper, we explore the weak form efficiency of Ghana’s foreign exchange (FX) market and analyse the existence of speculative activity and correlated shocks in the market. We use high and low frequency data covering May 31, 1999 to November 30, 2017. For robustness, four rigorous methods are employed. Our findings are as follows: First, the efficiency of the FX market is non-homogenous. This gives very little room for speculative trading options, hence, we surmise that speculative activities cannot necessarily account for the self-driven shocks in Ghana’s FX market system. Second, the cedi/dollar market inefficiency is concealed in conditional returns, and toggles between persistence and anti-persistence for the high and low data frequencies respectively. Third, varying significant persistence is detected for the volatility returns for all market series, however, the evidence is more pronounced for daily-, absolute-, and conditional volatility returns. These data dynamics prove useful and should be considered when examining empirical behaviours of asset markets. In summing up, investors and policy makers could rely on the findings and their implications in making decisions on investment and exchange rate control system

Modelling heterogeneous speculation in Ghana’s foreign exchange market: Evidence from ARFIMA-FIGARCH and Semi-Parametric methods

In this paper, we explore the weak form efficiency of Ghana’s foreign exchange (FX) market and analyse the existence of speculative activity and correlated shocks in the market. We use high and low frequency data covering May 31, 1999 to November 30, 2017. For robustness, four rigorous methods are employed. Our findings are as follows: First, the efficiency of the FX market is non-homogenous. This gives very little room for speculative trading options, hence, we surmise that speculative activities cannot necessarily account for the self-driven shocks in Ghana’s FX market system. Second, the cedi/dollar market inefficiency is concealed in conditional returns, and toggles between persistence and anti-persistence for the high and low data frequencies respectively. Third, varying significant persistence is detected for the volatility returns for all market series, however, the evidence is more pronounced for daily-, absolute-, and conditional volatility returns. These data dynamics prove useful and should be considered when examining empirical behaviours of asset markets. In summing up, investors and policy makers could rely on the findings and their implications in making decisions on investment and exchange rate control system

Assessing Ghana’s Trade Competitiveness: A Computation of Multilateral Real Exchange Rate Index

We assess Ghana’s trade competitiveness against its major trading partners. In doing so, we compute the real effective exchange rate (REER) index using total trade weighted for the period 2006-2012. The paper further evaluates the volatility of REER and the extent to which variations are ascribed to either the relative price or nominal exchange rate. The findings indicate annual appreciation of the REER in 2001, 2003-2006, 2008, 2010-2011 and 2015-2016. In contrast, real depreciation was recorded for the periods 2002, 2007, 2009 and 2012-2014. These developments in the REER largely mirrored trends in Ghana’s trade balance and supports the notion that real depreciation (appreciation) improves (worsens) trade balance (trade competitiveness). We further observed a strong positive pass-through of nominal exchange rate to real exchange rate, while the impact from price differentials was relatively small. This finding suggests that despite the perceived moderate pass-through of nominal depreciation to domestic prices, dynamics in the nominal exchange rate remain critical for Ghana’s trade competitiveness. Consequently, this paper assigns higher priority to nominal exchange rate stability to attain the desired level of real exchange rate alongside moderating volatilities in other macroeconomic variables

COVID-19 Outbreak and Co-Movement of Global Markets: Insight from Dynamic Wavelet Correlation Analysis

The COVID-19 pandemic has in its short existence caused economic downturn and affected global markets. As would be expected, the occurrences of global crises or shocks often heighten uncertainties in international markets and increase correlations among them. Yet, not much is known of the actual impacts of COVID-19 on the behavior of global markets. This piece attempts to investigate whether the COVID-19 crisis has had any impact on the interrelationship structure of international markets using the cross-wavelet squared coherence and a dynamic wavelet correlation technique. It emerges that co-movements of the pairwise series become stronger (0.70–0.89) during the heightened periods labeled as epidemic and pandemic phases of COVID-19, than that of the periods that mark the pre-COVID-19 era (−0.49–0.36), hence announcing the influence of the crisis and eroding prospect of benefiting from a hedge instrument and/or a diversifier. Again, we observe that stock market-Global REITs have been the most influenced pair, showing significantly peaked co-movements (0.63–0.87) during the distinct phases of COVID-19. We attribute these developments to the loose monetary and financial measures implemented by central banks of the world. The findings hold important implications for economic and financial actors regarding diversification, hedging, and investment risk management

Perceptions of Students Towards Tertiary Weekend School In Ghana

Weekend School has become a more flexible and recognized delivery format for widening access to higher institutions in Ghana. The purpose of this study is to investigate the perceptions of undergraduate students, about the weekend school system being offered by the Garden City University College in Kumasi. A survey questionnaire was designed to mainly obtain information on students’ opinions on content of academic programmes; academic facilities; tuition quality; and manpower skills. The ordinal regression model was used to model students’ responses. Results of the study indicate that weekend school is mostly patronized by students aged between 26-35 (56.9%) and by the actively employed (75.7%), largely because it provides a flexible way to combine work and study and life-long learning. The analysis using the ordinal regression model identified age, sex, marital status, current domicile region and students’ department as statistically significant demographic profiles that informed students’ views about GCUC’s weekend school. Keywords: higher education, weekend school, perception, ordinal regression model

PERCEPTIONS OF STUDENTS TOWARDS HIGHER NATIONAL DIPLOMA EDUCATION IN GHANA: A CASE STUDY OF KUMASI POLYTECHNIC

This paper investigates into perceptions towards HND education in Ghana. A structured questionnaire was designed as the main tool in soliciting student’s views across all faculties and the various departments respectively using simple random sampling technique. The ordinal logit model was applied to select significant factors that influenced student’s perceptions about the HND education. It was evident from the results that 52.5% s. disagree that their current programme of study offered them by Kumasi Polytechnic is their preferred programme whilst 41.1% also s. disagree the HND qualification is suitable to fill the middle level manpower gab of the Ghana economy. The survey further reveals that 37.9% agree that Kumasi Polytechnic provides the necessary logistics in enhancing vocational, technical & theoretical studies. However only about one in four students (26.2%) are satisfied with the general supervision of industrial attachment of the Polytechnic education AT Kumasi Polytechnic. Keywords: Ghana, Polytechnic, Ordinal, Perception, Satisfaction, Tertiary Educatio