Abstract:
The study sought to empirically examine the effects of real exchange rate on price
incentive to smuggle and the effect of price-incentive to smuggle on cocoa beans
export in Ghana. Autoregressive Distributed Lag model (ARDL) was employed in
analyzing the data. The study used secondary data from 1986 to 2016, gathered
from sources including the Food and Agricultural Organization, World
Development Indicators, Institute of Statistical, Social and Economic Research, and
the International Monetary Fund. The study found that price-incentive to smuggle
is influenced by the real effective exchange rate. Accordingly, appreciation of the
exchange rate reduced the price-incentive to smuggle while depreciation increased
it. Also, the study showed that cocoa beans export was negatively influenced by
price-incentive to smuggle, implying that, an increase in the price-incentive to
smuggle reduced the volumes of cocoa beans export. As depreciation in the
exchange rate increased the price-incentive to smuggle, the latter in turn reduced
the volumes of cocoa beans exports. The study therefore recommends that
COCOBOD must correctly forecast exchange rates movements to avoid wide
differences between the prices of cocoa in neighboring countries which creates the
incentive to smuggle.
