The Impact of Exchange Rate and Unemployment Rate on the Real Gross Domestic Product Growth Rate in Ghana

Abstract

Unemployment Rate and Exchange Rate are perhaps the two most important challenges that face the Ghanaian economy in recent time. This study seeks to examine the effect of the Exchange Rate and Unemployment Rate on the Real Gross Domestic Product Growth Rate in Ghana. The study used secondary data collected from World Bank, International Labour Organization and International Monetary Fund covering the period 1999–2018. Real Exchange Rate and Unemployment Rate were the independent variables whilst Real Gross Domestic Product Growth Rate was the dependent variable. The findings of the study were arrived at using the quantitative research method. The extent and nature of relationship between the various variables under study were identified using Pearson correlation, regression and hypotheses. The study found out that Unemployment Rate exhibited insignificant negative relationship towards Real Gross Domestic Product Growth Rate, while Real Exchange Rate was positive and also insignificant relationship on Real Gross Domestic Product Growth Rate. Based on the linearity of the multiple linear regression model, the independent variables contribute to 15.0% of the overall LN_GDP. The study then concludes that based on the effect of Exchange Rate and Unemployment Rate on RGDPGR in the findings, Government and other stakeholders should take steps such as creating new local industries and factories, and invest in existing ones to increase domestic produce which will in turn decrease Unemployment Rate and increase Exchange Rate.

Keywords: Gross Domestic Product, Unemployment Rate, Exchange Rate, Pearson correlation, Linear Regression.

DOI: 10.7176/JESD/10-18-15

Publication date:September 30^th 2019