Financial development and dollarization in Ghana: an empirical investigation

This study strengthens the frontiers of research on the drivers of dollarization in emerging economies by exploring the case of Ghana using the autoregressive distributed lag modelling framework. The data for the study spanned from January 2002 to March 2016. The evidence suggests that dollarization...

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Bibliographic Details
Published in:Cogent economics & finance 2019, Vol.7 (1), p.1-21
Main Authors: Tweneboah, George, Gatsi, John Garchie, Asamoah, Michael Effah
Format: Article
Language:English
Subjects:
autoregressive distributed lag model
cointegration
Currency substitution
demand for money
Dollar standard
dollarization
Economic models
Foreign exchange rates
Ghana
Inflation
Money
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Summary:This study strengthens the frontiers of research on the drivers of dollarization in emerging economies by exploring the case of Ghana using the autoregressive distributed lag modelling framework. The data for the study spanned from January 2002 to March 2016. The evidence suggests that dollarization shares a common stochastic trend with exchange rates, inflation, interest rate differential, real output, and financial development. The analysis points to the important roles of exchange rate depreciation and financial development in the evolution of dollarization. Whereas depreciation induces a switch to the use of foreign currency, financial development diminishes the trend. Some policy recommendations to curtail the rising dollarization of the Ghanaian economy have been provided.
ISSN:2332-2039
2332-2039
DOI:10.1080/23322039.2019.1663699