AJOU Central Library Repository: ANALYSIS OF THE DETERMINANTS OF THE TRADE BALANCE OF GHANA

ANALYSIS OF THE DETERMINANTS OF THE TRADE BALANCE OF GHANA

Alternative Abstract: For a period of over fifty years, the Republic of Ghana has been faced with a constant negative trade balance. This persistent trade deficit has impeded economic development of the country. Though there have been researches aimed at unearthing the root causes of trade balance, findings have differed from country to country. Using an annual time series data spanning a period of twenty-seven years (1988 – 2015), this research employs a vector error correction model to examine the determining factors of Ghana’s trade balance. The explanatory variables for this study include real effective exchange rates and real domestic income. The variables were checked for stationarity, after which a Johansen cointegration test was conducted. Findings from our research indicate that real domestic income is positively significant and linked to Ghana’s trade balance. The findings furthermore reveal that depreciation of Ghana’s currency will manifest an improvement in its balance of trade in the long-run. The outcome of this study therefore suggests an exchange rate policy review for Ghana, and most importantly, strengthening of local industries to increase production in order to boost export capacity and become export competitive. This is important because the only way that Ghana would benefit from currency depreciation will be to increase productivity.

Appears in Collections:: Special Graduate Schools > Graduate School of International Studies > Department of International Trade > International Trade > 3. Theses(Master)

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