Asymmetric Exchange Rate Pass‐Through to Consumer Prices in Ghana: Evidence from EMD‐NARDL Approach

Obeng, Camara Kwasi; Frimpong, Siaw; Amoako, Gilbert K.; Agyei, Samuel Kwaku; Asafo−Adjei, Emmanuel; Adam, Anokye M.

doi:10.1155/2022/9075263

Cited by 11 publications

(6 citation statements)

References 36 publications

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“…Accordingly, the stock returns and interest rate nexus could be bi-directional across time. However, it is expected that in the context of a developing economy, a negative nexus is more practicable due to growth constraints in times of poorly performing macroeconomic indicators (Owusu-Ankamah and Sakyi 2021; Amegavi et al 2022;Obeng et al 2022). Hence, the following research hypothesis is found:…”

Section: Nexus Between the Indicators Of The Gse And Interest Rate Me...mentioning

confidence: 97%

Dynamic Connectedness between Indicators of the Ghana Stock Exchange Returns and Macroeconomic Fundamentals

Idun

Asafo−Adjei

Adam

et al. 2022

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The performance of the Ghana Stock Exchange (GSE) over the years has been susceptible to both crises and country-specific factors reflected in its macroeconomic fundamentals. Accordingly, the GSE composite index (GSECI) has experienced rapid fluctuations across time, coupled with a declining market capitalisation from a reduction in the number of existing firms. The plunge in the number of firms is partly linked to the banking sector clean-up in 2017, which induced the collapse and consolidation of some financial institutions as well as weaknesses in other macroeconomic variables. This ignites an investigation into whether the synergistic impact of listed firms that represent the financial sector and the soundness of the banking sector measures are dominant factors that could drive or respond to shocks. Hence, the study investigates the lead-lag relationships and degree of integration among two indicators of the GSE—GSECI and GSE financial index (GSEFI), seven banking financial soundness indicators and eight interest rate measures. The wavelet approaches (biwavelet and wavelet multiple) are utilised to address the research problem. The DCC-GARCH connectedness approach is then employed as a robustness check. We found high interconnectedness between the indicators of the GSE and banking sector financial soundness, relative to the interest rates. Notwithstanding, the Treasury bill measures drive the GSE indicators in the short-, and medium-terms. In comparison with the two indicators of the GSE, significant comovements are dominant between the GSEFI and the two forms of selected macroeconomic variables. We advocate that the comovements among the indicators of the GSE, banking sector financial soundness and interest rate measures are heterogeneous and adaptive, especially during crises, but more significant comovements are germane to the GSEFI. The study provides further implications for policy, practice, and theory.

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Section: Nexus Between the Indicators Of The Gse And Interest Rate Me...mentioning

confidence: 97%

Dynamic Connectedness between Indicators of the Ghana Stock Exchange Returns and Macroeconomic Fundamentals

Idun

Asafo−Adjei

Adam

et al. 2022

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“…The study also concluded that although the relationship between price level and exchange rate is not unidirectional, the short run effect of devaluation on prices is smaller than the effect of inflation on exchange rate. (Obeng, 2022) study focused on the asymmetric nature of the impact of exchange rate on inflation using NARDL. Using Ghana monthly economic data from January 1990 to January 2020, the study found that the cointegration between inflation rate and exchange rate in Ghana is asymmetric in both short and long run.…”

Section: The Asymmetric Impact Of Exchange Rateon Inflation In Egypt ...mentioning

confidence: 99%

The Asymmetric Impact of Exchange Rate on Inflation in Egypt Since 2013

Albagoury

2024

مجلة الدراسات الأفريقية

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This paper aims to analyze the impact of exchange rate changes on the price level in Egypt since 2013. The objective of this study is not only to test the existence of such relationship but also to identify to what extent the inflation responds to exchange rate are different by the direction of this change. In order to test this asymmetric impact of exchange rate on inflation, Nonlinear Auto Regressive Distributed Lag model (NARDL) is used. This model could capture not only the cointegration between the two variables, but also the asymmetric exchange rate pass-through inflation.The analysis shows that exchange rate has a significant impact on inflation in Egypt in the short run and long run,and that this impact is asymmetric. Inflation responds only to the positive changes in the exchange rate in both short run and long run, while negative changes were insignificant.

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“…Camara et al. (2022) analyzed the US dollar ERPT to consumer prices in Ghana from January 1990 to January 2020 using a non-linear ARDL model.…”

Section: Review Of Related Literaturementioning

confidence: 99%

“…Stronger ERPT is associated with countries that have a higher dollarization and current account deficit, as well as higher inflation, a higher risk premium and higher foreign currency (FX) debt levels. Camara et al (2022) analyzed the US dollar ERPT to consumer prices in Ghana from January 1990 to January 2020 using a non-linear ARDL model. Accordingly, they have proved the existence of cointegration between the exchange rate and consumer prices.…”

Section: Empirical Reviewmentioning

confidence: 99%

Exchange rate pass-through to inflation in South Africa: is there non-linearity?

Gereziher

Nuru

2023

AJEMS

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PurposeThis paper aims to examine the asymmetric effects of exchange rate shocks on inflation for a small open economy, namely South Africa, over the period 1970Q1–2020Q1.Design/methodology/approachA threshold vector autoregressive model that allows parameters to switch according to whether a threshold variable crosses an estimated threshold is employed to address the objective of this paper. The threshold value is determined endogenously using the Hansen (1996) test. Generalized impulse responses introduced by Koop et al. (1996) are used to study the effects of exchange rate shocks on inflation depending on their size, sign and timing to the inflation cycle. The authors also employed a Cholesky decomposition identification scheme to identify exchange rate shocks in the non-linear model.FindingsThe results show that there is a non-linearity effect of the exchange rate shock on inflation. In particular, the effects of 1 or 2 standard deviations of positive (appreciation) or negative (depreciation) exchange rate shock on inflation are small in the long run but a bit larger in the high inflation regime than the low inflation regime.Originality/valueThis paper contributes to the literature on the non-linear effects of exchange rate pass-through (ERPT) to inflation for Sub-Saharan African economies in general and the South African economy in particular by incorporating the size and timing of the exchange rate shocks to the inflation cycle.

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Asymmetric Exchange Rate Pass‐Through to Consumer Prices in Ghana: Evidence from EMD‐NARDL Approach

Cited by 11 publications

References 36 publications

Dynamic Connectedness between Indicators of the Ghana Stock Exchange Returns and Macroeconomic Fundamentals

Dynamic Connectedness between Indicators of the Ghana Stock Exchange Returns and Macroeconomic Fundamentals

The Asymmetric Impact of Exchange Rate on Inflation in Egypt Since 2013

Exchange rate pass-through to inflation in South Africa: is there non-linearity?

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