Sanusi, Aliyu Rafindadi (2010): Lessons from the foreign exchange market reforms in Ghana: 1983-2006. Published in: Journal of Economics and Allied Fields , Vol. IV, No. 2 (2010)
Download (227kB) | Preview
This paper critically examines the trade and exchange reforms that paved way for the implementation of the current flexible, market-based exchange rate regime in Ghana. Using descriptive method, the paper argues that Ghana has succeeded in unifying its exchange rates without the inflationary consequences, as Pinto (1988, 1990) predicts, partly because of the strategy used. The strategy involved a gradual, rather than overnight, exit from the rigidly fixed exchange rate regime. It therefore enabled the development of a relatively more liquid and deeper foreign exchange market as well as the development of monetary authorities’ capacity to monitor and supervise the operations of the market. In addition, the IMF/World Bank’s support with foreign exchange (loans and aid) enabled an orderly and gradual exit to a flexible regime in Ghana. The paper then examines the macroeconomic response to the reforms by analysing the trends in some major economic aggregates during the reform process. One major policy lesson from the Ghanaian exchange rate reforms is that unless there is a reliable source of foreign exchange, liberalising trade could cause policy reversals by causing substantial and sudden exchange rate depreciations that are politically risky.
|Item Type:||MPRA Paper|
|Original Title:||Lessons from the foreign exchange market reforms in Ghana: 1983-2006|
|Keywords:||Economic Reform, Trade Reforms, Parallel Market, Exchange Rates Unification, Ghana|
|Subjects:||F - International Economics > F1 - Trade > F13 - Trade Policy ; International Trade Organizations
F - International Economics > F3 - International Finance > F35 - Foreign Aid
F - International Economics > F3 - International Finance > F31 - Foreign Exchange
|Depositing User:||Aliyu Rafindadi Sanusi|
|Date Deposited:||15. Mar 2011 09:32|
|Last Modified:||25. Apr 2015 20:37|
Bawumia, M., T. Owusu-Danso and A. McIntyre (2008). “African Financial Reforms: Ghana's Reforms Transform Its Financial Sector”. IMF Survey, May, 22
Chhibber, A. and N. Shafik (1991) "Inflationary Consequences of Devaluation with Parallel Markets: The Case of Ghana", in Economic Reforms in Sub-Saharan Africa, Washington, DC, World Bank.
Dordunoo, C. K. (1994) The Foreign Exchange Market and the Dutch Auction System in Ghana. African Economic Research Consortium Research Paper, 24.
Duttagupta, R., G. Fernandez and C. Karacadag (2004) "From Fixed to Float: Operational Aspects of Moving toward Exchange Rate Flexibility", IMF Working Paper no. 126.
Faruqee, R. And I. Hussain (1994) “Adjustment in seven African Countries” in. Hussain, I. and R. Faruqee (Eds.), Adjustment in Africa: Lessons from Country Case Studies, Ch 1, pp. 1-10
Gervais, J.-P. & Larue, B. (1999) Do Reductions in Black Market Exchange Rate Premia Cause Inflation? CREA Research Series, R.99.07.
Gyima-Brempong, K. (1992) Exchange Control and Black Market Exchange Rate in Ghana: A Simultaneous Equation Approach. East African Economic Review, 8, 41-53.
Hadjimichael, M. T., Nowak, M., Sharer, R. & Tahari, A. (1994) Adjustment for Growth: The African Experience. IMF Occasional Paper, 143.
Harrigan, J. & Oduro, A. D. (2000) Exchange Rate Policy and the Balance of Payments: 1972-96. IN Aryeetey, E., Harrigan, J. & Nissanke, M. (Eds.) Economic Reforms in Ghana: The Miracle & the Mirage. Oxford, James Curreys Ltd.
IMF (1994) Ghana, Senegal, and Uganda Adopt Bold Reforms. IMF Survey.
IMF (2004a) Macroeconomic and Structural Policies in Fund-Supported Programs: Review of Experience.
IMF(2007a) Ghana: Ex Post Assessment of Longer-Term Program Engagement. IMF Country Report.
IMF (2009) International Financial Statistics. International Monetary Fund
Jebuni, C. (1994) “Financial Structure, Reforms and Economic Development: Ghana.” African Development Report, Abidjan, African Development Bank.
Leechor, C. (1994) Ghana: Frontrunner in Adjustment. IN Hussain, I. & Faruqee, R. (Eds.) Adjustment in Africa: Lessons from Country Case Studies. Washington DC, World Bank.
Leith, J. C. and L. Söderling (2000) Ghana: Long Term Growth, Atrophy, and Recovery, Emerging Africa, OECD Development Centre.
May, E. (1985). "Exchange Controls and parallel Economies in Sub-Saharan Africa: Focus on Ghana." World Bank Staff Working Papers 711.
Mosley, P. (1996) “The Failure of Aid and Adjustment Policies in Sub-Saharan Africa: Counter-Examples and Policy Proposals”, Journal of African Economies, 5, 406-443.
Mumuni, Z. and E. Owusu-Afriyie (2004) "Determinants of the Cedi/Dollar Rate of Exchange in Ghana: A Monetary Approach", Bank of Ghana Working Paper (WP/BoG-06).
Ng, F. & Yeats, A. J. (2000) “On the Trade Performance of Sub-Saharan African Countries: Cause for More Hope or More of the Same”, Africa Region Research Working Paper, Series No. 7.
Pinto, B. (1988) “Black Market for Foreign Exchange, Real Exchange Rates and Inflation: Over Night versus Gradual Reform in Sub-Saharan Africa”, World Bank Policy Research Working Papers, 84.
Pinto, B. (1990) “Black Market Premia, Exchange Rate Unification and Inflation in Sub-Saharan Africa”, The World Economic Review, 1, 321-339.
Pinto, B. (1991) “Black Markets for Foreign Exchange, Real Exchange Rates and Inflation” Journal of International Economics, 30, 121-135.
Oduro, A. D. (2000) “Performance of the External Trade Sector Since1970, Economic Reforms on Ghana: The Miracle & the Mirage. E. Aryeetey, J. Harrigan and M. Nissanke. Oxford, James Currey Ltd: 152-167.
Sheng, A. and A. A. Tannor (1996) "Ghana’s Financial Restructuring, 1983-91", in Bank Restructuring: Lessons from the 1980s, Sheng, A. Washington,DC, World Bank.
Sowa, N. K. (1994) "Fiscal deficits, output growth and inflation targets in Ghana", World Development 22(8): 1105-1117.
Werlin, H. (1994) "Ghana and South Korea: Explaining Development Disparities", Journal of Asian and African Studies, 29(3-4)