Dynamic linkages between Food Price Fluctuations and Exchange Rates: Evidence from Ghana

This study examines the causal relationship between food prices and exchange rates in Ghana based on monthly time series data for the period 2008-2013. The study uses the Granger causality approach based on the classical unit root tests and employs the Vector autoregression model (VAR) in the estimation. Two testable hypotheses were investigated: (1) Do exchange rates Granger-cause food price fluctuations? And (2) Do food price fluctuations Granger-cause exchange rates? The empirical results of the study show that there is unidirectional causal relationship between food prices and exchange rates in Ghana. The results suggest that there was causality from food prices to exchange rate and not the converse