DOI: 10.36347/sjebm.2015.v02i10.011

Pages: 1041-1047

Exchange rate behaviour is one topical issue that generates great controversy and debate among economists and policy analysts in Ghana. This study seeks to explore the long run relationship between narrow money supply (M2) and Ghana Cedi US Dollar exchange rate. Applying Engle-Granger co-integration technique on annual data spanning thirty two (32) years, the study has revealed that there is no systematic equilibrium relationship between the Cedi-Dollar exchange rate and narrow money supply of Ghana. In other words, the available data does not support the view that the depreciation of the Ghanaian currency is attributable to the rise in domestic money supply. It is suggested that the cause of the continuous fall in the international value of the Ghanaian Cedi is sought elsewhere. We also suggest that the persistent trade deficit over the years should be looked at closely as a plausible cause of the woes of the Ghanaian Cedi.