Estimating the effect of currency substitution on exchange rate volatility: Evidence from Ghana
AbstractThis paper investigates the impact of currency substitution on exchange rate volatility using monthly data from January 1990 to May 2019. The paper applies the exponential generalized autoregressive conditional heteroscedastic in mean (EGARCH-M) model as the estimation technique. The results...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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Taylor & Francis Group
2023-12-01
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| Series: | Cogent Social Sciences |
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| Online Access: | https://www.tandfonline.com/doi/10.1080/23311886.2023.2233318 |
| _version_ | 1797198226424594432 |
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| author | Hadrat Yusif Samuel Tawiah Baidoo Michael Kofi Hanson |
| author_facet | Hadrat Yusif Samuel Tawiah Baidoo Michael Kofi Hanson |
| author_sort | Hadrat Yusif |
| collection | DOAJ |
| description | AbstractThis paper investigates the impact of currency substitution on exchange rate volatility using monthly data from January 1990 to May 2019. The paper applies the exponential generalized autoregressive conditional heteroscedastic in mean (EGARCH-M) model as the estimation technique. The results reveal that currency substitution has a significant positive impact on exchange rate volatility. The paper also confirms the existence of leverage effects in the exchange rate volatility. It is also revealed that negative shocks are found to have greater effect than positive shocks. Furthermore, the results indicate that inflation targeting framework has a significant positive impact on exchange rate volatility. Based on the findings and discussion, the paper concludes that currency substitution increases exchange rate volatility in Ghana. Given the findings, vital policy implications aimed at reducing or eliminating volatility in exchange rate have been provided for policy consideration. |
| first_indexed | 2024-03-12T16:46:35Z |
| format | Article |
| id | doaj.art-72d3e169f3fc4897b038dd3701add2ec |
| institution | Directory Open Access Journal |
| issn | 2331-1886 |
| language | English |
| last_indexed | 2024-04-24T06:56:30Z |
| publishDate | 2023-12-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Cogent Social Sciences |
| spelling | doaj.art-72d3e169f3fc4897b038dd3701add2ec2024-04-22T10:42:49ZengTaylor & Francis GroupCogent Social Sciences2331-18862023-12-019110.1080/23311886.2023.2233318Estimating the effect of currency substitution on exchange rate volatility: Evidence from GhanaHadrat Yusif0Samuel Tawiah Baidoo1Michael Kofi Hanson2Department of Economics, Kwame Nkrumah University of Science and Technology, Kumasi, GhanaDepartment of Economics, Kwame Nkrumah University of Science and Technology, Kumasi, GhanaDepartment of Economics, Kwame Nkrumah University of Science and Technology, Kumasi, GhanaAbstractThis paper investigates the impact of currency substitution on exchange rate volatility using monthly data from January 1990 to May 2019. The paper applies the exponential generalized autoregressive conditional heteroscedastic in mean (EGARCH-M) model as the estimation technique. The results reveal that currency substitution has a significant positive impact on exchange rate volatility. The paper also confirms the existence of leverage effects in the exchange rate volatility. It is also revealed that negative shocks are found to have greater effect than positive shocks. Furthermore, the results indicate that inflation targeting framework has a significant positive impact on exchange rate volatility. Based on the findings and discussion, the paper concludes that currency substitution increases exchange rate volatility in Ghana. Given the findings, vital policy implications aimed at reducing or eliminating volatility in exchange rate have been provided for policy consideration.https://www.tandfonline.com/doi/10.1080/23311886.2023.2233318currency substitutionexchange rate volatilityinflation targetingEGARCHGhana |
| spellingShingle | Hadrat Yusif Samuel Tawiah Baidoo Michael Kofi Hanson Estimating the effect of currency substitution on exchange rate volatility: Evidence from Ghana Cogent Social Sciences currency substitution exchange rate volatility inflation targeting EGARCH Ghana |
| title | Estimating the effect of currency substitution on exchange rate volatility: Evidence from Ghana |
| title_full | Estimating the effect of currency substitution on exchange rate volatility: Evidence from Ghana |
| title_fullStr | Estimating the effect of currency substitution on exchange rate volatility: Evidence from Ghana |
| title_full_unstemmed | Estimating the effect of currency substitution on exchange rate volatility: Evidence from Ghana |
| title_short | Estimating the effect of currency substitution on exchange rate volatility: Evidence from Ghana |
| title_sort | estimating the effect of currency substitution on exchange rate volatility evidence from ghana |
| topic | currency substitution exchange rate volatility inflation targeting EGARCH Ghana |
| url | https://www.tandfonline.com/doi/10.1080/23311886.2023.2233318 |
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