Survey of Reserves Reactions to the GDP Per Capita in Ghana
Keywords:
Reserves; including Gold; GDP per capita; Markov switching model; IPSAS; GhanaAbstract
This study provides empirical evidence for determining the benefits of reserves, including gold in
supporting the Gross Domestic Product (GDP) per capita in Ghana period between 1960 and 2019. This study
aims is to ascertain the undulating trend tendencies of financial vulnerability in reserve management and
estimate the extent of reserve benefits that persist to increase GDP per capita earnings using the Markov
switching model. This study uses the Makov switching model as an estimator of the undulating trend
propensities and persists the benefits of reserves to the earnings of GDP per capita in Ghana. The study
obtained data from the 2019 World Development Indicators of the World Bank. The results reveal that
reserve benefits are more persistent in regime 1, with positive significance at the 1% level, achieving higher
scores of both 50th and 75th percentiles and lower variance scores. Howeve r, the result for regime 2 do not
support sufficient benefits to the earnings of GDP per capita. A better explanatory model should identify
other factors to test the estimation for future research. The study will be encouraged to expand the sample to
cover more countries in Sub-Saharan Africa, by using existing empirical archival data. This study empirically
tests the evidence of persistent reserve benefits to GDP per capita in Ghana’s context which can have
resemblance lessons on other African countries using the Markov switching model.
References
Abdul-Gafaru, A. (2017). The galamsey menace in Ghana: A political problem requiring political solutions. Policy Brief 5.
Adoma-Worae, T., Addo-Painstil, S & Yeboah, B. (2021). Benefits of Domestic Bank Loan to Private Companies in Ghana.
Journal of Accounting and Management, Vol. 11(2).
Afriyie, K., Kuumuori G. J., & Afua Abrafi, A. J. (2016). The good in evil: A discourse analysis of the galamsey industry in
Ghana. Oxford Development Studies. 44(4), 493-508.
Agbozo, E., & Spassov, K.(2019). Social media as a trigger for positive political action: The case of Ghana's fight against
illegal small-scale mining (Galamsey). African Journal of Science, Technology, Innovation and Development 11(5), 611-617.
Aizenman, J. & Lee, J. (2005). International Reserves: Precautionary versus Mercantilist Views, Theory and Evidence.
National Bureau of Economic Research (NBER) Working Paper No. 11366. Cambridge, MA: NBER.
Asare, E.T., Burton, B. & Dunne, T. (2022). Strategic accountability for sustainability of natural resources – public discharge
and optimism in sub-Saharan Africa. Sustainability Accounting, Management and Policy Journal, Vol. 13(2), pp. 414-437.
Ayodeji, I. O. (2017). Oil and the Naira: A Markov Switching Perspective. African Development Review 29 (4): 562–574.
Bayram, K., Abdullah, A. & Meera, A.K. (2018). Identifying the optimal level of gold as a reserve asset using Black–
Litterman model: The case for Malaysia, Turkey, KSA and Pakistan. International Journal of Islamic and Middle Eastern
Finance and Management, Vol. 11 No. 3, pp. 334-356.
Bastourre, D., Carrera, J. & Ibarlucia, J. (2009). What is Driving Reserves Accumulation. Review of International
Economics, 17, 861–877.
Bianchi, J., Hatchondo, J. C. & Martinez, L. (2014). International reserves and rollover risk.
Brock, W. A., Dechert, W. D., & Scheinkman, J. A. (1987). A Test for Independence Based on The Correlation Dimension.
Department of Economics, University of Wisconsin at Madison, University of Houston, and University of Chicago. Brooks,
C. (2008). Introductory Econometrics for Finance.
Buchardt, K.; Møller, T. & Schmidt, K. B. (2015). Cash flows and policyholder behaviour in the semi-Markov life insurance
setup. Scandinavian Actuarial Journal, Issue 8.
Cobbinah, P.B. (2015). Local attitudes towards natural resources management in rural Ghana. Management of Environmental
Quality, Vol. 26 No. 3, pp. 423-436.
Dominguez, K. M., Hashimoto, Y., Ito, T. (2012). International reserves and the global financial crisis. J. Int. Econ. 88 (2),
–406.
Ghana Living Standards Survey 7 (2017). Main Report. Ghana.
Hamilton, J. (1989). A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle.
Econometrica 57: 357–384.
Hamilton, J. (1990). Analysis of Time Series Subject to Changes in Regime. Journal of Econometrics 45:39–70.
Herris, S. J. (2018). Markov Switching Models. In Essentials of Time Series for Financial Applications, edited by M.
Guidolin and M. Pedio, 329–380. London: Elsevier.
Jeanne, O. (2007). International Reserves in Emerging Market Countries: Too Much of a Good Thing? Brookings Papers on
Economic Activity: 1, Brookings Institution.
Jeanne, O. & Rancière, J. (2011). The optimal level of international reserves for emerging market countries: a new formula
and some applications. Economic Journal 121, 905–930.
Malloy, M. S. (2013). Factors influencing emerging market central banks’ decision to intervene in foreign exchange markets.
Working Paper No. 13/70. Washington, DC: International Monetary Fund.
Md. Kamrul (2012). An Approach to ARMA Model Identification from Noise Corrupted Output Measurements[J].
Transactions on Fundamentals of Electronics, 18
Nelson, C. R., Piger, J., & Zivot, E. (2001). Markov Regime Switching and Unit-Root Tests. Journal of Business and
Economics, 19(4).
Nneka, C.A.B. (2012). External reserves: Causality effect of macroeconomic variables in Nigeria: 1980–2009. Kuwait
Chapter of the Arabian Journal of Business and Management Review, 1(12), 14–27.
Obstfeld, M., Shambaugh, J. & Taylor, A.M. (2010). Financial Stability, the Trilemma, and International Reserves. American
Economic Journal: Macroeconomics, 2, 57–94.
Pacheco, L.; Fraixedas, S.; Fernandez-Llamazares, A.; Estela, N.; Mominee, R.; & Guallar, F. (2012). Perspectives on
sustainable resource conservation in community nature reserves: A case study from senegal. Sustainability, Vol. 4, 3158–
Radetzki, M., Eggert, G. R., Lagos, G., Lima, M. & Tilton, E. J. (2008). The Boom in Mineral Markets: How Long Might it
Last? Resource Policy 33 (3): 125–128.
Reserve Bank of Australia (2018). Exchange Rates and the Australian Economy. Sydney: Reserve Bank of Australia.
Rodrik, D. (2006). The Social Cost of Foreign Exchange Reserves. International Economic Journal, 20: 253-266.
Spindt, P. & Tarban, V.(1983). Bank Earning Asset Behavior and Causality Between Reserves and Money: Lagged Versus
Contemporaneous Reserve Accounting. Journal of Monetary Economics, 333-341.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2022 Benjamin Yeboah, Thomas Adoma-Worae, Michael Yeboah, Debrah Ofori
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
The author fully assumes the content originality and the holograph signature makes him responsible in case of trial.
