Determinants of Ghana’s bilateral export: Does exchange rate variability matter?

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JUNE, 2016.
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The purpose of this study was to empirically analyse the internal and external factors that drives Ghana‟s bilateral exports. This was to take a critical look at whether variability in Ghana‟s exchange rate really matters in Ghana‟s bilateral export flow. Since the external value of the Ghana cedi has been unstable and persistent increase depreciation against major currencies for the past two decades. The study employed a panel data spanning from 1995 to 2014 and observed 20 of Ghana‟s trading partners. An augmented Gravity model and panel data estimation techniques such as the Pooled Ordinary Least Squares (POLS), Fixed effects and Random effects models were the methodology used in the estimation. The result revealed that the real bilateral exchange rate is negative and insignificant, however, GDP is positive and statistically significant. Trade openness, infrastructure and Foreign Direct Investment (FDI) are all having positive relationship with total trade of export but not statistically significant. Distance and language as well as the population of Ghana all have negative relation with the total bilateral export flow. As implied by the results, Bank of Ghana must ensure that variations in exchange rate are relatively predictable, minimal and less detrimental. The country must envisage an economic growth and the reduction of trade barriers as well as improvement in infrastructure which are require to advance the export trade of the country.
A Thesis Submitted to the Department of Economics, Kwame Nkrumah University of Science and Technology, in partial fulfillment of the requirements for the award of Master Of Science degree in economics Faculty of Social Science, College of Humanities and Social Sciences June, 2016.