Exchange Rate Pass Through in Ghana

Loloh, Francis White

doi:10.2139/ssrn.2412128

Cited by 9 publications

(16 citation statements)

References 15 publications

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“…The IRFs showed that an exchange rate appreciation led to a fall in consumer prices, albeit the impact is not unitary. Findings corroborates the literature (see (Acheampong, 2004;Frimpong and Adam, 2010;Sanusi, 2010;Loloh, 2014;Adu et al, 2015)).…”

Section: Introductionsupporting

confidence: 91%

“…The intuition is that innovations to exchange rate are less benign to CPI fluctuations. This evidence contradicts (Loloh, 2014); (Acheampong, 2004) who found exchange rate shocks to explain less variability in CPI than NFP. They justified their result on the notion that the NFP basket contained a large proportion of tradeable goods vis-à-vis the CPI basket.…”

Section: Introductionmentioning

confidence: 62%

“…Findings showed that the three shocks have a significant impact on exchange rate in Ghana. Loloh (2014) estimates ERPT for Ghana on monthly data from 1994:1-2012:12. He employed a VAR model where shocks are identified using a recursive ordering.…”

Section: Empirical Reviewmentioning

confidence: 99%

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An Agnostic Analysis of Exchange Rate Movement in Ghana

Asafo

Matuka

2020

The Economics and Finance Letters

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Based on quarterly data for the period 2006:3-2018:4, the effect of exchange movement on a set of price indices in Ghana is examined via a Bayesian Vector Autoregressive model. Using normal inverted-Wishart priors, the posterior estimates are generated by Markov Chain Monte Carlo draws via a sign restriction algorithm. Findings showed that the response of consumer prices (CPI), producer prices (PPI) and non-food prices (NFP) to exchange rate shocks is low and incomplete. Furthermore, the forecast error variance decomposition (FEVD) indicated that CPI is most responsive to exchange rate impulses than NFP and PPI. In addition, inflationary pressures in Ghana emanated from exchange rate sources other than monetary sources. The paper recommends "pricing in local currency" as a deliberate policy to insulate domestic prices from volatilities in the exchange rate. Contribution/Originality: This study used a new estimation methodology to examine the effect of exchange rate dynamics on prices in Ghana.

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Section: Introductionsupporting

confidence: 91%

Section: Introductionmentioning

confidence: 62%

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An Agnostic Analysis of Exchange Rate Movement in Ghana

Asafo

Matuka

2020

The Economics and Finance Letters

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“…The approaches have evolved overtime from single equation models (Hooper and Mann, 1989;Campa and Goldberg, 2005;Choudhri and Hakura, 2006) to simultaneous equation approach (Zorzi et al, 2007) to various types of Vector Autoregressive (VAR) and panel data estimation approaches. These include the recursive VAR (McCarthy, 2000;Loloh, 2014, Maka, 2013 structural VAR (Gagnon and Ihrig, 2004;Sanusi, 2010;An and Wang, 2012), the vector error correction models (Frankel et al, 2012;Karoro et al, 2009;Yanamandra, 2015) and panel estimation techniques (Bailliu and Fujii, 2004;Barhoumi, 2006).…”

Section: Empirical Literaturementioning

confidence: 99%

“…ERPT to consumer prices in Ghana the low pass-through of the exchange rate (Frimpong and Adam, 2010;Loloh, 2014) even though others claim that pass-through is substantial (Sanusi, 2010;Boamah, 2013). A typical observation is that the analysis of the possible asymmetric pass-through effects of exchange rate on consumer prices in Ghana is missing in the literature except for Maka (2013).…”

mentioning

confidence: 99%

Exchange rate pass-through to consumer prices in Ghana: is there asymmetry?

Amoah

Aziakpono

2018

IJOEM

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Purpose The purpose of this paper is to reexamine the speed and magnitude of exchange rate pass-through (ERPT) to consumer prices in Ghana. Design/methodology/approach The Johansen Maximum Likelihood approach is employed in the estimation of different models of symmetric and asymmetric ERPT. Specifically asymmetric ERPT models with respect to the direction and size of exchange rate changes are estimated. Findings Results reveal that even though a depreciation in the nominal effective exchange rate will lead to an increase of consumer prices in the long-run, it is not statistically significant. Evidence also suggests a significant asymmetry with respect to direction and size of exchange rate changes. This indicates that the right ERPT model is an asymmetric model. Specifically ERPT is found to be incomplete but relatively higher in periods of depreciation than in periods of appreciation; that is 53 percent against 3 percent. ERPT is also higher during episodes of large changes (about 51 percent). Research limitations/implications It would have been interesting to analyze the impact on consumer prices through changes in import prices. That approach was not adopted due to lack of consistent data on import prices in Ghana. Practical implications It is imperative that the monetary authorities critically monitor exchange rate movements in order to be able to take swift policy action so as to counteract any inflationary pressures from the external sector. In particular, much attention should be paid to events and arrangements that could result in large depreciation of the exchange rate. Originality/value While previous studies have assumed a symmetric ERPT model for Ghana, this paper is unique in that it investigates the most appropriate model for examining ERPT in Ghana whether symmetric or an asymmetric.

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