Exchange rate instability and depreciation have plagued Ghana’s economy during most of the ﬂexible exchange rate period that began in the early 1980s. This paper examines the causes of the instability in the period 1992-2015. The paper identiﬁes undisciplined ﬁscal and monetary policies and poor external outcomes—including terms-of-trade weakness and failure to attract the necessary capital ﬂows to support external balance—as the major factors that caused exchange rate instability and weakness in the period.
On the contrary, prudent ﬁscal and monetary policies, as well as more favorable external outcomes, have tended to support stability in the exchange rate. The paper recommends policies to ensure exchange rate stability as a means of fostering macroeconomic stability and economic growth. Click here to read more.