Comovement between commodity returns in Ghana : the role of exchange rates

This paper examines the relationship between commodity returns in Ghana and if any, the role of exchange rate on such relationship using wavelet analysis and monthly data from September, 2007 to March, 2021. We test for the robustness of the empirical findings using multiple wavelet analysis. We find that exchange rate plays an intrinsic role in the dynamic comovement of commodity returns with strong coherence at short and medium terms. The partial wavelet coherence analysis shows that exchange rate drives commodity interdependence. This study is of relevance to other developing export-dependent countries and the Ghanaian government in making strategic trade policies and to investors that are interested in these cross-sector commodities. Governments and investors that are privy to the intrinsic role of exchange rate on its dependent commodities can benefit from this study to diversify against exchange rate fluctuations and the implicit effect of inflation.