Open AccessExchange Rate and Stock Price Nexus: Evidence from Ghana
Author(s) -
Peter Arhenful,
Richard Fosu,
Mathew Owusu-Mensah
Publication year - 2022
Publication title -
journal of social and development sciences
Language(s) - English
Resource type - Journals
ISSN - 2221-1152
DOI - 10.22610/jsds.v12i4(s).3260
Subject(s) - exchange rate , stock exchange , stock (firearms) , econometrics , economics , augmented dickey–fuller test , stock price , liberian dollar , proxy (statistics) , unit root test , monetary economics , unit root , cointegration , statistics , mathematics , finance , series (stratigraphy) , geography , biology , paleontology , archaeology
This study aimed at investigating the link between the Ghanaian exchange rate and stock prices from July 2007 to December 2019, to establish whether appreciation in exchange rate causes stock price increases or otherwise. The Ghana Stock Exchange's (GSE) All-Share Index; served as a proxy for stock prices, while nominal monthly exchange rates for the Ghana Cedi in terms of the US Dollar were utilized as a proxy exchange rate. The Pearson's Product Moment Correlation test was employed to evaluate the link between the two variables, and the Augmented Dickey-Fuller (ADF) test was employed to determine the data's stationarity qualities. The series were all non-stationary since they had unit roots; however, stationarity was attained at the first difference. The results of the regression and correlation analysis conducted revealed that the two macroeconomic variables are negatively connected in the Ghanaian context. In view of the negative association between the exchange rate and stock prices in Ghana, the study advises policymakers to be cautious when implementing exchange rate measures.