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The Effect of Exchange Rate Fluctuation on the Performance of Manufacturing Firms: An Empirical Evidence from Ghana

Emmanuel Buabeng (), Enock Ayesu and Opoku Adabor ()
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Emmanuel Buabeng: Department of Economics, Kwame Nkrumah University of Science and Technology
Opoku Adabor: Department of Economics, Kwame Nkrumah University of Science and Technology

Economics Literature, 2019, vol. 1, issue 2, 133-147

Abstract: This study examines the effect of exchange rate fluctuations on the performance of manufacturing firms in Ghana for the period 1990 to 2018. The study uses the bounds test approach to cointegration within the framework of autoregressive distributed lags model as the estimation strategy. The results reveal that exchange rate and monetary policy rate has a negative and significant relationship with manufacturing firm performance. It was also found that inflation, trade openness, and investment have significant positive relation with manufacturing firm performance in Ghana. Based on the negative and significant relationship with exchange rate and manufacturing firm performance, it is recommended that government and private partnership should ensure effective management of the exchange rate fluctuation and also encourage manufacturing firms to patronize locally made capital goods for their production in the face of a depreciating exchange rate. Further, the study recommends that monetary authorities should reduce interest rate to increase investment by firms. This will enhance manufacturing firms’ performance.

Keywords: Exchange rate; manufacturing firms’ performance; ARDL; Ghana (search for similar items in EconPapers)
JEL-codes: C22 D20 D51 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.22440/elit.1.1.4

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