EconPapers    
Economics at your fingertips  
 

On the impact of exchange rate uncertainty on private investment in Ghana

Emmanuel Kwasi Mensah, Lawrence adu Asamoah () and Johnson Ahiadorme

International Journal of Finance & Economics, 2021, vol. 26, issue 1, 208-217

Abstract: High levels of private investment are correlated with higher economic growth and development across countries, but questions remain whether this relationship is sustainable given the high levels of exchange rate uncertainty in developing economies albeit other macroeconomic instabilities. This paper examines empirically the impact of real exchange rate uncertainty on private investment in Ghana. We, thus, apply the accelerator theory to investigate the contributing effect of real exchange rate uncertainty on the movement of private investment from the economic standpoint of an import‐dependent economy such as Ghana. The study employs annual time series data from 1980 to 2016. Moreover, we adopt the autoregressive distributed lag model of cointegration where we find evidence of a long‐run positive relationship between positive private investment and real exchange rate uncertainty as well as trade openness. The short‐run evidence provides a confirmation of the impact of inflation, trade, and real exchange rate uncertainty on private investment. Specifically, our results show that there is a positive pass‐through effect from real exchange rate uncertainty to private investment decision in resource allocation. Shocks from lending rate and terms of trade were found to exhibit negative effects on private investment in the short and long run. As a matter of policy, it is imperative for policymakers in developing economies to consider the effect of exchange rate and terms of trade associated with bilateral trade and investment‐related agreements to minimize the effects of contemporaneous shocks from uncertainties.

Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1002/ijfe.1785

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:ijfiec:v:26:y:2021:i:1:p:208-217

Ordering information: This journal article can be ordered from
http://jws-edcv.wile ... PRINT_ISSN=1076-9307

Access Statistics for this article

International Journal of Finance & Economics is currently edited by Mark P. Taylor, Keith Cuthbertson and Michael P. Dooley

More articles in International Journal of Finance & Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2023-03-08
Handle: RePEc:wly:ijfiec:v:26:y:2021:i:1:p:208-217