College of Humanities & Social Sciences

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Browsing College of Humanities & Social Sciences by Author "Abavare, Eric K. K."

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    Determinants of exchange rate in Ghana: Cointegration and wavelet analysis.
    (KNUST, 2016-08) Abavare, Eric K. K.
    We empirically examine the determinants of the nominal exchange rate in Ghana using both time series econometric techniques and wavelet application for annual data spanning the period 1960-2014. The determinant variables under consideration included: inflation, supply of money(M1 and M2), GDP growth and trade openness. In particular, Engle-Granger method was used to test for the causal relationship, wavelets power and wavelets coherency spectrum for direction of co-movements among the variables were applied. In addition, we determine the long and short run relationships between nominal exchange rate and its determinants using autoregressive distributive lag (ARDL) and other variants of ordinary least square cointegration techniques such as fully modified(FM), dynamics and integrated modified-OLS. As required in standard econometric analysis, unit root tests were initially performed using Augmented Dickey-Fuller, Philips-Perron and Kwiatkowski Philip Schmidt and Shin methods to assess the data generating process of the interested variables. The time series econometric analysis showed that all the variables exhibited bidirectional relationship with exchange rate with the exception of supply of money which showed unidirectional causation, from money supply to exchange rate. In the cointegration analysis, we found that all the variables showed statistically significant long term equilibrium relationship although money supply and GDP had ambiguous signs. However, inflation and trade openness coefficients were theoretically consistent with expectation. Also the lagged dependent variable and the dummy variable for exchange rate regime appears to influence exchange rate dynamics in the long run. In short, all the interested variables have positive coefficients, signifying depreciating effect on the exchange rate. The adjustment coefficient obtained was 60.78%, indicating that it takes approximately 20 months for exchange rate to fully revert to equilibrium from any deviations. The results from the wavelet application are also striking. Wavelets power spectrum clearly shows activities in the short to medium frequency band of the variables. The cross coherency test also indicated that exchange rate depreciation leads (or Granger cause) the other variables, with the exception of trade openness which drives exchange rate depreciation.
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    The government revenue and expenditure nexus: the sustainability of the implementation of the single spine salary structure in Ghana
    (July, 2015) Abavare, Eric K. K.
    The study examines the causal linkage and long run relationship between government revenue and expenditures of government of Ghana over a times series spanning the period 2000-2014. We employed several econometric approaches including Engle-Granger two step method, Johansen cointegration vector error correction models and ordinary least squares regression with breakpoints based on Bai-Peron techniques to carry out the analysis. We test for unit root using augmented Dickey-Fuller and Philips-Perron methods to assess the series properties as well as checking for Ganger pairwise causality of the data variables. Our results of the ADF and PP unit root tests suggests that the time-series are not stationary at levels but stationary at the first di erencing. The findings from Granger pairwise causality test suggests bidirectional causation from revenue to expenditure in the long run supporting the synchronization hypothesis which is in dissenting view with earlier researchers. Similarly, the result of the Engle-Granger cointegration test indicates that a significant long term equilibrium relationship exist between the government revenue and expenditure in excellent agreement with Johansen multivariate analysis. Finally, the manually imposed structural breakpoints on the system to represent the pre- and postimplementation of the single spine salary structure was found to be consistent with the case when the manual imposition was relaxed for the system to detect the breakponts itself against the government fiscal profile in the spanned period under study. The results demonstrate that the long-term sustainability of the single spine salary structure would be in looming doubt if government do not take pragmatic steps to improve its revenue generation assiduously.