Unravelling the Tapestry: Understanding the Factors Shaping Current Account Imbalances in Ghana

Yeboah, Samuel (2023): Unravelling the Tapestry: Understanding the Factors Shaping Current Account Imbalances in Ghana.

Abstract

This research aims to unravel the factors shaping current account imbalances in Ghana, with a focus on understanding the underlying causes and implications for the country's economic stability. The study explores the multifaceted nature of these imbalances by examining structural factors, exchange rate dynamics, monetary policy, external factors, and capital flows. It identifies limited diversification of the economy, inadequate infrastructure, and low productivity levels as significant structural constraints that hinder Ghana's ability to reduce import dependency and achieve a more balanced current account. Furthermore, it highlights the role of currency depreciation, inconsistent monetary policies, and inflationary pressures in contributing to trade imbalances and capital flight, exacerbating current account deficits. The study also considers external factors such as commodity price fluctuations, global trade patterns, and regional integration, which can influence Ghana's current account imbalances. Additionally, it explores the implications of these imbalances for external debt sustainability, terms of trade, and overall economic performance. The research provides policymakers and stakeholders with valuable insights into the factors driving Ghana's current account imbalances, informing the formulation of effective policy measures to address these imbalances and promote sustainable economic development.

• Item Type: MPRA Paper
• Language: English
• Keywords: Current account imbalances; Ghana; Trade deficit; Balance of payments; Structural factors; Diversification of the economy; Infrastructure; Productivity levels; Exchange rate dynamics; Monetary policy; Currency depreciation; Inflationary pressures; External factors; Commodity price fluctuations; Global trade patterns; Regional integration; Capital flows; Foreign direct investment; Portfolio investment; External debt sustainability; Terms of trade; Economic performance
• Subjects: F - International Economics > F3 - International Finance > F32 - Current Account Adjustment ; Short-Term Capital Movements; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F47 - Forecasting and Simulation: Models and Applications; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance

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