Exchange rate and economic growth, Ghana’s response to rodrik 2008

Background: The link involving exchange rates and economic development has gotten a lot of attention in recent years. Various data sets and experimental techniques were employed in the research, but a consistent conclusion emerged in virtually all of them: undervalued, i.e., competitive, exchange rates are directly related with better economic growth. At least two theories have been proposed to explain such a connection. Method: Considering the role that exchange rate play in an economy and the issues that comes with its fluctuations and managements especially in developing economies like Ghana, it becomes essential to statistically measure its impact on growth of an economy. This paper seeks to contribute to the knowledge on the discussion as to how exchange rate affects a country’s economic growth and if the findings (Rodrik 2008) apply. Results: The data used in this paper was gotten from 2008 to 2017. The results confirmed the findings of Rodrik that exchange rate in the long run has a negative effect on economic growth for developing countries. Conclusions: The findings of this paper reveal that import is significant and that changes in a country’s imports could affect it Gross Domestic Product (GDP). This is practically true because most developing economies are import driven. The paper suggests that’s governments of developing economies such as Ghana put in efforts to achieve a better balance of trade so as to boost economic growth.