Impact of cocoa price shock on the bank profitability in Ghana

Okyere, Ebenezer; Mensah, Alice Constance

doi:10.5897/jeif2021.1144

Cited by 2 publications

(4 citation statements)

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“…The banking sector in Ghana is highly exposed to commodity prices, as many banks lend to commodity producers and traders (Bank of Ghana 2019, 2021a. Changes in commodity prices can therefore affect the quality of banks' loan portfolios, with lower commodity prices potentially leading to loan defaults and higher credit risk (Okyere and Mensah 2021;Kyei et al 2023). Fluctuations in macroeconomic variables can affect the level of dynamic connectedness between commodity prices and the banking sector (Rover et al 2013;Anshu and Gakhar 2019;Abdullahi 2020).…”

Section: Figure 1: Value Of Major Commodities Exported In Ghanamentioning

confidence: 99%

“…Moreover, there is a high level of interconnectedness among commodity prices, BsFSI and macroeconomic variables, which adds to the complexity of the situation (Osman et al 2023;Kyei et al 2023). Thus, the BsFSI is also closely linked to these factors, as changes in commodity prices can affect the sector's stability (Okyere and Mensah 2021). Also, macroeconomic variables such as inflation and exchange rates are also interdependent with these factors, meaning that changes in one variable can have ripple effects throughout the economy (Naser 2019;Vo et al 2019;Devia 2019).…”

Section: Transmission Mechanismmentioning

confidence: 99%

“…Ghana's exports of commodities are mainly traded in the international markets; hence the prices are gritty by global supply and demand factors, which ultimately affect the prices Ghana receives (Cantah 2018). Also, domestic production of commodities is affected by factors such as weather patterns, government policies, and technological changes (Okyere and Mensah 2021). Changes in these factors may impact the…”

Section: Introductionmentioning

confidence: 99%

“…and provide more than 80% of export revenues in 2021 (Ministry of Finance, 2022; UNCTAD, 2021). Some previous studies have employed these same set of commodities to assess how they affect the Ghanaian economy(Kinda et al 2018;Abaidoo et al 2021;Okyere and Mensah 2021;Archer et al 2022; …”

mentioning

confidence: 99%

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Modelling the dynamic connectedness among commodity prices, banking sector’s financial soundness, and macroeconomic variables in Ghana

Kyei

Cantah

Owusu

2023

Preprint

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The study explores the dynamic connectedness among international commodity price, banking sector’s financial soundness (BSFSI) and some selected macroeconomic variables in Ghana. To achieve this, the study employed the TVP-VAR connectedness and a robustness technique: Wavelet Multiple. We utilise monthly data of three (3) commodity prices (cocoa, gold and crude oil), seven BsFSI and six (6) macroeconomic variables in Ghana. In addition, the global economic policy uncertainty (GEPU) was used as a control variable as a gauge of external shock. The monthly data spanned January 2007 to March 2022 to include some major economic, political and health events, yielding 183 datapoints. We found strong degree of connectedness among international commodity prices, BsFSI, and macroeconomic variables in Ghana at an estimate of 68.36% for the total connectedness index. However, the connectedness value changes across time which corroborates the adaptive market hypothesis. We demonstrate strong evidence of interdependence and contagion among the variables. Findings from the study requires that the government should broaden its production and export base to have more diverse sources of economic growth, enabling it to manage the erratic nature of earnings tied to commodities exports on the financial stability of Ghana.

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