The impact of exchange rate movements on import demand behaviour of Ghana

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Persistent fluctuations in the exchange rate create uncertainties which increase the risk level of traders which eventually has an effect on imports. The aim of this paper is to empirically investigate the impact of exchange rate movement and other important covariates on import demand of Ghana using Annual data from 1980 to 2013.The Generalized Autoregressive Conditional Heteroscedasticity model was used to calculate the real exchange rate movement.By employing the ARDL methodology, the study found the existence of both short run dynamics and long run relationship between import demand, real income, relative price of imports, real effective exchange rate and exchange rate movements. The results show an insignificant and negative impact of exchange rate movement on the import demand of Ghana. The study again found that relative price of import has statistically negative impact on import demand in Ghana and also reveals that the income elasticity of imports is positive and significant.
A Thesis Submitted to the Department of Economics, Kwame Nkrumah University of Science and Technology, in partial fulfilment of the requirement for the degree of Master of Philosophy in Economics, 2016