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Exchange Rate Uncertainty and Domestic Investment in Ghana

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  • Njindan Iyke, Bernard
  • Ho, Sin-Yu

Abstract

The impact of exchange rate uncertainty on domestic investment remains a topical issue in international finance. The existing studies based on macro- or micro-level data have produced mixed findings leaving the issue widely open for further investigation. We revisit this issue at the macro-level by differentiating the short-run impacts of exchange rate uncertainty from long-run impacts. Using annual data for Ghana covering the period 1980–2015, we found that exchange rate uncertainty has differential impacts on domestic investment in the short run. That is, while the current level of uncertainty enhances investment, previous levels of uncertainty dampen investment. In the long run, exchange rate uncertainty has a positive impact on domestic investment. These findings are robust to alternative specifications of our model.

Suggested Citation

  • Njindan Iyke, Bernard & Ho, Sin-Yu, 2017. "Exchange Rate Uncertainty and Domestic Investment in Ghana," MPRA Paper 80474, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:80474
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    More about this item

    Keywords

    Exchange Rate Uncertainty; Domestic Investment; Ghana.;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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