The study examined the relationship between inflation
and exchange rates in Ghana, the sectoral structure of the economy of Ghana and
also explored how this structure influences economic growth when inflation and exchange
rates are under consideration. The study gathered data over the sampled period of
1980- to 2019 and used appropriate techniques to test for unit roots and co-integration
in the data. After applying the appropriate regression techniques results obtained,
it was identified that there was a negative relationship between inflation and exchange rates in Ghana from
1980- to 2019. Also, results obtained from the descriptive analysis and correlation
results showed that the current structure of the economy was dominated by services
value-added, followed by industry value added and then agriculture value-added.
Finally, results showed different impacts of interactions between inflation and
sectoral structure on economic growth in Ghana, as compared to the interactions
between exchange rates and sectoral structure in Ghana. The study concluded that
the structure of the economy of Ghana has also evolved—from one dominated by agriculture
value added to one that is now dominated by services value-added. This change in
the structure has resulted from changes in economic policies and the adoption of
liberalization policies that have allowed for more trade and free markets. It was
recommended that the real issue for policymakers should not be how to control inflation
or the exchange rate. Instead, policymakers should focus on how to structure the
economy of Ghana to take advantage of the dynamics of the global marketplace and
reduce the influence of the exchange rate on the economy of Ghana. Also, there is
a need for more public education on the importance of consuming and patronizing
locally manufactured goods and services.
References
[1]
Acemoglu, D. (2012). Introduction to Economic Growth. Journal of Economic Theory, 147, 545-550. https://doi.org/10.1016/j.jet.2012.01.023
[2]
Achsani, N. A., Fauzi, A. J. F. A., & Abdullah, P. (2010). The Relationship between Inflation and Real Exchange Rate: Comparative Study between Asean + 3, the EU and North America. European Journal of Economics, Finance and Administrative Sciences, No. 18, 69-76.
[3]
Adam, K. (2009). Monetary Policy and Aggregate Volatility. Journal of Monetary Economics, 56, S1-S18. https://doi.org/10.1016/j.jmoneco.2009.06.008
[4]
Adewuyi, A. O., & Akpokodje, G. (2013). Exchange Rate Volatility and Economic Activities of Africa’s Sub-Groups. The International Trade Journal, 27, 349-384. https://doi.org/10.1080/08853908.2013.813352
[5]
Adu, G., Karimu, A., & Mensah, J. T. (2015). An Empirical Analysis of Exchange Rate Dynamics and Pass-Through Effects on Domestic Prices in Ghana (Working Paper No. S-33200-GHA-1). International Growth Centre.
[6]
Agyapong, D., Adam, A. M., & Asiamah, M. (2016). Macroeconomic Behaviour and Economic Growth in Ghana. SPOUDAI: Journal of Economics and Business, 66, 26-42.
[7]
Ahiabor, G., & Amoah, A. (2019). Examining the Effect of Real Effective Exchange Rate Volatility on Economic Growth: Evidence from Ghana. Journal of Economics and Economic Education Research, 20, 1-14.
[8]
Aisen, A., & Veiga, F. J. (2008). Political Instability and Inflation Volatility. Public Choice, 135, 207-223. https://doi.org/10.1007/s11127-007-9254-x
[9]
Alagidede, P., Baah-Boateng, W., & Nketiah-Amponsah, E. (2013). The Ghanaian Economy: An Overview. Ghanaian Journal of Economics, 1, 4-34.
[10]
Alba, J. D., & Park, D. (2005). An Empirical Investigation of Purchasing Power Parity (PPP) for Turkey. Journal of Policy Modeling, 27, 989-1000. https://doi.org/10.1016/j.jpolmod.2005.06.012
[11]
Albuquerque, C. R., & Portugal, M. S. (2005). Pass-Through from Exchange Rate to Prices in Brazil: An Analysis Using Time-Varying Parameters for the 1980 2002 Period. Revista de economía, 12, 17-74.
[12]
Allor, P. W. (2019). An Empirical Investigation into the Effect of Monetary Policy and Inflation on the Exchange Rate in Ghana. 2019 Awards for Excellence in Student Research and Creative Activity—Documents. 1. https://thekeep.eiu.edu/lib_awards_2019_docs/1
[13]
Alvi, M. (2016). A Manual for Selecting Sampling Techniques in Research (Paper No. 70218). Munich Personal RePEc Archive. https://mpra.ub.uni-muenchen.de/id/eprint/70218
[14]
Aryeetey, E., & Baah-Boateng, W. (2015). Understanding Ghana’s Growth Success Story And Job Creation Challenges (Working Paper No. 2015/140). World Institute for Development Economics Research (UNU-WIDER). https://doi.org/10.35188/UNU-WIDER/2015/029-4
[15]
Asafu-Adjaye, J. (2008). Analysis of inflation in Ghana, 1964 to 2006. Ghana Policy Journal, 2, 51-69.
[16]
Ashour, M., & Yong, C. C. (2018). The Impact of Exchange Rate Regimes on Economic Growth: Empirical Study of a Set of Developing Countries during the Period 1974-2006. The Journal of International Trade & Economic Development, 27, 74-90. https://doi.org/10.1080/09638199.2017.1339117
[17]
Backus, D. (1984). Empirical Models of the Exchange Rate: Separating the Wheat from the Chaff. Canadian Journal of Economics, 17, 824-846. https://doi.org/10.2307/135076
[18]
Bagus, P., Howden, D., & Gabriel, A. (2014). Causes and Consequences of Inflation. Business and Society Review, 119, 497-517. https://doi.org/10.1111/basr.12043
[19]
Baum, A., & Turner, N. (2004). Retention Rates, Reinvestment and Depreciation in European Office Markets. Journal of Property Investment & Finance, 22, 214-235. https://doi.org/10.1108/14635780410538159
[20]
Bernanke, B., Reinhart, V., & Sack, B. (2004). Monetary Policy Alternatives at the Zero Bound: An Empirical Assessment. Brookings Papers on Economic Activity, 2, 1-100. https://doi.org/10.1353/eca.2005.0002
[21]
Berument, H. (2002). Döviz kuru hareketleri ve enflasyon dinamigi. Türkiye örnegi.
[22]
Bobai, F. D., Ubangida, S., & Umar, Y. S. (2013). An Assessment of Exchange Rate Volatility and Inflation in Nigeria. Journal of Emerging Issues in Economics, Finance and Banking, 1, 321-340.
[23]
Bowa, C. (1994). The Determinants of the Inflationary Process in Zambia (1973-1993). Doctoral Dissertation, University of Nairobi.
[24]
Calvo, G. A., & Reinhart, C. M. (2002). Fear of Floating. The Quarterly Journal of Economics, 117, 379-408. https://doi.org/10.1162/003355302753650274
[25]
Canetti, E., & Greene, J. (2000). Monetary Growth and Exchange Rate Depreciation as Causes of Inflation in African Countries (Working Paper). International Monetary Fund, World Bank.
[26]
Chang, H. J., & Andreoni, A. (2020). Industrial Policy in the 21st Century. Development and Change, 51, 324-351. https://doi.org/10.1111/dech.12570
[27]
Chhibber, A. (1991). Africa’s Rising Inflation: Causes, Consequences, and Cures (Vol. 577). World Bank Publications.
[28]
Chiaraah, A. & Nkegbe, P. K. (2014). GDP Growth, Money Growth, Exchange Rate and Inflation in Ghana. Journal of Contemporary Issues in Business Research, 3, 75-87.
[29]
Constantine, C. (2017). Economic Structures, Institutions and Economic Performance. Journal of Economic Structures, 6, Article No. 2. https://doi.org/10.1186/s40008-017-0063-1
[30]
Dahal, M. P. (2017). Sinking in Premature Deindustrialization or Revitalizing Industrialization? Nepal’s Prospective. Economic Journal of Development Issues, 23, 35-70. https://doi.org/10.3126/ejdi.v23i1-2.19064
[31]
Dasgupta, S., & Singh, A. (2005). Will Services Be the New Engine of Indian Economic Growth? Development and Change, 36, 1035-1057. https://doi.org/10.1111/j.0012-155X.2005.00449.x
[32]
Dickey, D. A., & Fuller, W. A. (1979). Distribution of the Estimators for Autoregressive Time Series with a Unit Root. Journal of the American Statistical Association, 74, 427-431. https://doi.org/10.1080/01621459.1979.10482531
[33]
Doyle, E. (2001). Exchange Rate Volatility and IRISH-UK Trade, 1979-1992. Applied Economics, 33, 249-265. https://doi.org/10.1080/00036840122999
[34]
Eggoh, J. C., & Khan, M. (2014). On the Nonlinear Relationship between Inflation and Economic Growth. Research in Economics, 68, 133-143. https://doi.org/10.1016/j.rie.2014.01.001
[35]
Ehigiamusoe, K. U., & Lean, H. H. (2019). Influence of Real Exchange Rate on the Finance-Growth Nexus in the West African Region. Economies, 7, Article No. 23. https://doi.org/10.3390/economies7010023
[36]
Frenkel, J. A. (1976). A Monetary Approach to the Exchange Rate: Doctrinal Aspects and Empirical Evidence. Scandinavian Journal of Economics, 78, 200-224. https://doi.org/10.2307/3439924
[37]
Furman, J., & Stiglitz, J. E. (1998). Economic Consequences of Income Inequality. In J. Hole (Ed.), Income Inequality: Issues and Policy Options (pp. 221-263). Federal Reserve Bank of Kansas City.
[38]
Goldfajn, M. I., & Gupta, M. P. (1999). Does Monetary Policy Stabilize the Exchange Rate Following a Currency Crisis? International Monetary Fund. https://doi.org/10.2139/ssrn.164350
[39]
Gottschalk, J., Kalonji, K. D., & Miyajima, K. (2008). Analyzing Determinants of Inflation When There Are Data Limitation: The Case of Sierra Leone (Working Paper No. 2008-2271). International Monetary Fund. https://doi.org/10.2139/ssrn.1316739
[40]
Greene, W. H. (2003). Econometric Analysis. Pearson Education India.
[41]
Guillermo, V., & Vegh, C. A. (2012). Overcoming the Fear of Free Falling: Monetary Policy Graduation in Emerging Markets (No. w18175). National Bureau of Economic Research.
[42]
Haraguchi, N. (2015). Patterns of Structural Change and Manufacturing Development. In J. Weiss, & M. Tribe (Eds.), Routledge Handbook of Industry and Development (pp. 52-78). Routledge. https://doi.org/10.4324/9780203387061-10
[43]
Haraguchi, N., Martorano, B., & Sanfilippo, M. (2019). What Factors Drive Successful Industrialization? Evidence and Implications for Developing Countries. Structural Change and Economic Dynamics, 49, 266-276. https://doi.org/10.1016/j.strueco.2018.11.002
[44]
Heale, R., & Twycross, A. (2015). Validity and Reliability in Quantitative Studies. Evidence-Based Nursing, 18, 66-67. https://doi.org/10.1136/eb-2015-102129
[45]
Hussain, N. (2019). The Jurisprudence of Emergency: Colonialism and the Rule of Law. University of Michigan Press. https://doi.org/10.3998/mpub.11336144
[46]
Ibarra, R., & Trupkin, D. R. (2016). Re-Examining the Relationship between Inflation and Growth: Do Institutions Matter in Developing Countries? Economic Modelling, 52, 332-351. https://doi.org/10.1016/j.econmod.2015.09.011
[47]
Ibrahim, M., & Alagidede, I. P. (2019). Asymmetric Effects of Financial Development on Economic Growth in Ghana. Journal of Sustainable Finance & Investment, 11, 1-17.
[48]
Kabundi, A. (2012). Dynamics of inflation in Uganda (Working Paper No. 152). African Development Bank Group.
[49]
Kamin, S. B., & Klau, M. (2003). A Multi-Country Comparison of the Linkages between Inflation and Exchange Rate Competitiveness. International Journal of Finance & Economics, 8, 167-184. https://doi.org/10.1002/ijfe.205
[50]
Khan, N. (2018). Public Procurement Fundamentals: Lessons from and for the Field. Emerald Group Publishing. https://doi.org/10.1108/9781787546059
[51]
Kraay, A. (1998). In Search of the Macroeconomic Effects of Capital Account Liberalization. The World Bank Group.
[52]
Lucy, A., Sunday, R. J., & Pacific, Y. K. T. (2015). Exchange Rate and Trade Balance in Ghana: Testing the Validity of the Marshall-Lerner Condition. International Journal of Development and Emerging Economics, 3, 38-52.
[53]
Mankiw, N. G. (2010). The Trilemma of International Finance. The New York Times, 10.
[54]
Marchionatti, R. (2020). Economics in the United States: Between Classicism, Neoclassicism, and Institutionalism. In Economic Theory in the Twentieth Century: An Intellectual History-Volume I (pp. 219-265). Palgrave Macmillan. https://doi.org/10.1007/978-3-030-40297-6_7
[55]
Ministry of Finance (2020). Budget Highlights of the Government of Ghana for the 2020 Financial Year. Ministry of Finance.
[56]
Mothuti, G., & Phiri, A. (2018). Inflation-Growth Nexus in Botswana: Can Lower Inflation Spur Growth in the Country? Global Economy Journal, 18, Article ID: 20180045. https://doi.org/10.1515/gej-2018-0045
[57]
Mussa, M. (1976). The Exchange Rate, the Balance of Payments, and Monetary and Fiscal Policy under a Regime of Controlled Floating. Scandinavian Journal of Economics, 78, 229-248. https://doi.org/10.2307/3439926
[58]
Nomfundo, P. V., & Odhiambo, N. M. (2017). A Review of Imports Structure and Reforms in Ghana. EuroEconomica, 36, 144-158.
[59]
Nortey, E. N., Ngoh, D. D., Doku-Amponsah, K., & Ofori-Boateng, K. (2015). Modelling Inflation Rates and Exchange Rates in Ghana: Application of Multivariate GARCH Models. Springer Plus, 4, Article No. 86. https://doi.org/10.1186/s40064-015-0837-6
[60]
Özkan, A. (2013). Evaluation of Healthcare Waste Treatment/Disposal Alternatives by Using Multi-Criteria Decision-Making Techniques. Waste Management & Research, 31, 141-149. https://doi.org/10.1177/0734242X12471578
[61]
Pauw, K. (2018). The State of Agriculture in Ghana: Towards Agricultural Innovation in Ghana: An Evidence-Based Approach. https://www.poverty-action.org/sites/default/files/Pauw-agriculture-in-ghana.pdf
[62]
Phillips, P. C., & Perron, P. (1988). Testing for a Unit Root in Time Series Regression. Biometrika, 75, 335-346. https://doi.org/10.1093/biomet/75.2.335
[63]
Phillips, P., & Hansen, B. (1990). Statistical Inferences in Instrumental Variables Regression with I (1) Processes. Review of Economic Studies, 57, 99-125. https://doi.org/10.2307/2297545
[64]
Rajan, R. G., & Subramanian, A. (2011). Aid, Dutch Disease, and Manufacturing Growth. Journal of Development Economics, 94, 106-118. https://doi.org/10.1016/j.jdeveco.2009.12.004
[65]
Razmi, A., Rapetti, M., & Skott, P. (2012). The Real Exchange Rate and Economic Development. Structural Change and Economic Dynamics, 23, 151-169. https://doi.org/10.1016/j.strueco.2012.01.002
[66]
Razzaque, M. A., Bidisha, S. H., & Khondker, B. H. (2017). Exchange Rate and Economic Growth: An Empirical Assessment for Bangladesh. Journal of South Asian Development, 12, 42-64. https://doi.org/10.1177/0973174117702712
[67]
Rodrik, D. (2008). The Real Exchange Rate and Economic Growth. Brookings Papers on Economic Activity, 2008, 365-412. https://doi.org/10.1353/eca.0.0020
[68]
Sargent, T. J., & Wallace, N. (1981). Some Unpleasant Monetarist Arithmetic. Federal Reserve Bank of Minneapolis Quarterly Review, 5, 1-17. https://doi.org/10.21034/qr.531
[69]
Solow, R. M. (1956). A Contribution to the theory of Economic Growth. The Quarterly Journal of Economics, 70, 65-94. https://doi.org/10.2307/1884513
[70]
Sowa, N., & Kwakye, J. (1993). Inflationary Trends and Control in Ghana. AERC Research Paper 22, African Economic Research Consortium.
[71]
Strauss, A., & Corbin, J. M. (1997). Grounded Theory in Practice. Sage.
[72]
Szirmai, A. (2012). Industrialization as an Engine of Growth in Developing Countries, 1950-2005. Structural Change and Economic Dynamics, 23, 406-420. https://doi.org/10.1016/j.strueco.2011.01.005
[73]
Tai, P. N., Sek, S. K., & Har, W. M. (2012). Interest Rate Pass-Through and Monetary Transmission in Asia. International Journal of Economics and Finance, 4, 163-174. https://doi.org/10.5539/ijef.v4n2p163
[74]
Tenreyro, S. (2007). On the Trade Impact of Nominal Exchange Rate Volatility. Journal of Development Economics, 82, 485-508. https://doi.org/10.1016/j.jdeveco.2006.03.007
[75]
Tregenna, F. (2015). Deindustrialization, Structural Change and Sustainable Economic Growth. UNU-MERIT.
[76]
Van Wyk, B. (2012). Research Design and Methods Part I. The University of Western Cape.
[77]
Vasile, A. J., & Ungureanu, A. (2014). The Importance of Economic Structure Evolution in Achieving Performance—From Agrarian Economy to Competitiveness in Romanian economy. Economics of Agriculture, 61, 945-957. https://doi.org/10.5937/ekoPolj1404945A
[78]
Wang, K. L., & Barrett, C. B. (2007). Estimating the Effects of Exchange Rate Volatility on Export Volumes. Journal of Agricultural and Resource Economics, 32, 225-255.
[79]
Weeks, J. R. (2020). Population: An Introduction to Concepts and Issues. Cengage Learning.
[80]
World Bank (2020). World Development Indicators. https://databank.worldbank.org/source/world-development-indicators
