Impact of Exchange Rate Threshold Level on Stock Market Performance-Evidence from Ghana

David Mensah Awadzie (Accra Institute of Technology, Ghana Business School, Accra, Ghana)


The exchange rate plays a significant role in an economy and also the purpose of this study is to examine the impact of exchange rate threshold level on the capital market performance. The study used a Threshold Autoregressive model introduced by [24] and [12]. The study used quarter-time series data for thirty years from 1990 to 2019. The capital market performance was measured by the value of shares traded; market turnover; market capitalization and all-shares index. However, the results unconcealed the subsequently estimated threshold level of exchange rate for every performance indicator: 7.94%; 25.33%; 25.33%, and 7.80% respectively. In all, the threshold level of the exchange rate estimated was 8 and 25 percent. The findings suggest that a low rate is performance-enhancing. Additionally, the exchange rate above the threshold level is harmful to the capital market performance. The findings of this investigation may be helpful to the government of Ghana and policymakers as they decide on an exchange rate target to implement to avoid the prejudicious effects of high exchange rates whereas getting the growth advantages of the low exchange rate. The finding of the study shows that the exchange rate impacts the economy more than inflation however, not many works in the subject area have been done in Sub-Saharan Africa. Therefore, I suggest that more threshold studies ought to be meted out on the exchange rate in the other sectors of the economy to determine its impact on the economy


Capital market performance; Inflation;Threshold autoregressive; Market capitalization all-shares index; Turnover ratio

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