Relationship between Exchange Rate Volatility and Interest Rates Evidence from Ghana

Sarpong Mohammed, Abubakari Mohammed, Edward Nketiah-Amponsah

Research output: Contribution to journalArticlepeer-review

9 Citations (Scopus)

Abstract

This paper examines the effect of interest rates on exchange rate volatilities in Ghana. It utilizes the Quarterly Time Series dataset spanning 2000 Quarter 1 to 2017 Quarter 2 and the Autoregressive Distributed Lag model as well as the Vector Error Correction Model to investigate the long-run and short-run relationships between the variables. The results showed that in the long-run model, exchange rate volatility was seen to be influenced by money supply, inflation, Central Bank’s policy rate, and the Ghana Stock Exchange composite index. However, in the short-run model, exchange rate volatility was found to be significantly influenced by its past values and the Central Bank’s policy rate.

Original languageEnglish
Article number1893258
JournalCogent Economics and Finance
Volume9
Issue number1
DOIs
Publication statusPublished - 2021

Keywords

  • Exchange rate volatility
  • autoregressive-distributed lag
  • interest rate

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