TITLE:
Trend Analysis of Exchange Rate of the Ghana Cedi against the US Dollar Using Time Series
AUTHORS:
Francis Ayiah-Mensah, Prince Arthur-Nunoo, Joseph Acquah, John Awuah Addor
KEYWORDS:
Ghana Cedi, US Dollar, Ghana Stock Exchange, Inflation, Exchange Rates
JOURNAL NAME:
Open Journal of Statistics,
Vol.13 No.5,
October
12,
2023
ABSTRACT: Exchange rate volatility or its stability is a key determinant of the
state of a country’s economy. The Ghana cedi’s performance against the US
dollar in recent times has been the worse in the past decade. This has resulted
in high inflation, high cost of living and high cost of production in Ghana.
Despite the recent economic recovery growth, the cedi continues to strife in
high rate of exchange against the dollar. This study examines and models a trend,
and makes predictions of future rates of the cedis against the US dollar.
Methodology: The study used a 13-year data of exchange rates of Ghana cedi and
the US dollar spanning from 2010 to mid-2023 from the Bank of Ghana’s economic
data on exchange rates, Ghana Stock Exchange and the World Bank. The ARIMA and
SARIMA models were used to model the trends and for forecasting, taking into
the consideration the asymmetric and seasonal effect of the data. Results: The
outputs show that, the Ghana cedi will continue to rise but steadily against
the US dollar for the remaining months of 2023 except in December, and continue
to decline afterwards through into 2024. Conclusion: The cedi continues to
weaken in value and the strength of its purchasing power. A weaker currency
depicts a “junk” economy which affects its
foreign investment. As the US dollar continues to rise, the Government and policy makers must implement effective policies
to stabilize its rise against the cedi. Export of commodities must
increase in addition to import restrictions to balance trade deficit and to
strengthen the Ghana Cedi.