Global uncertainties and the Ghanaian cedi: time-frequency and directional information flow analysis

This study aims to investigate the impact of global uncertainties on the movement of the Ghanaian cedi. We employed wavelet and Renyi transfer entropy techniques to assess the relationship using daily exchange rates from June 2016 to October 2023. We also did a sub-sample analysis for 2022, which analysts described as a crisis year. We found that the volatility of the Ghanaian cedi is significantly influenced by the oil price volatility and Ghana’s sovereign spread indexes. Our wavelet results showed that risks are muted in the short run but intensify in the medium to long term. The study concludes that debt sustainability is critical for the stability of the Ghanaian cedi. It further found that muted risks accompany investment opportunities at the short end of the horizon.