Real exchange rate and economic growth in Ghana

Abstract

This study sought to determine the effect of real effective exchange rate on economic growth in Ghana using annual data for the period 1984 to 2014. The study employed the Auto Regressive Distributed Lag Estimation technique as well as the Bounds Testing approach to cointegration to establish a long run relationship between Economic Growth and Real Effective Exchange Rate in Ghana. The result suggests that real exchange rate, capital stock, and labour force exert a positive and statistically significant effect on economic growth both in the long-run and short-run. The study recommended that there is the need to ensure macroeconomic stability by ensuring exchange rate stability; productive government expenditure as well as ensuring the growth of the capital stock.