Munich Personal RePEc Archive

The Effects of Exchange Rates on Trade Balance in Ghana

Akorli, Edem (2017): The Effects of Exchange Rates on Trade Balance in Ghana.

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Abstract

This study examines the impact of exchange rates on the trade balance of Ghana. The paper uses macroeconomic indicators such as CPI and GDP in addition to Real Effective Exchange Rate to achieve the objectives of this study. Annual Time Series Data gathered from 1980 – 2016 was used in the analyses. Simple OLS regression was conducted to estimate the long run relationship of the variables on trade balance. The Johansen Cointegration Test and Error Correction Model were used to establish short run relationships. Findings from the study indicate that exchange rate has a negative impact on trade balance in the long run whiles GDP was revealed to impact negatively on the trade balance thus suggesting that an increase in the GDP leads to a deteriorating trade balance. The J-Curve phenomenon was however found to be non-existent in Ghana.

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