Measuring volatility spill-over effects of crude oil prices on GhanaÔÇÖs exchange rate and stock market between 1991 and 2015

This paper examines the shock spill-over and volatility spill-over effects from crude oil prices to the Ghana exchange rate and the Ghana stock market index. We employ the multivariate GARCH BEKK and TBEKK models using monthly data from January 1991 to December 2015. We address two central issues. First, whether crude oil price movements affect the Ghana exchange rate and the Ghana stock market. Second, whether the crude oil price effect depends on the treatment of crude oil prices as exogenous or endogenous. Our findings indicate that world crude oil prices have significant spill-over effects on the exchange rate, and this result is unaffected by the treatment of world crude oil prices as exogenous or endogenous. However, the relationship between crude oil prices and the Ghana stock market depends on whether the crude oil price is exogenous or endogenous. The implication of these results is that internationally diversified portfolio investors in Ghana should use hedging strategies such as currency forwards, futures, and options to protect their investments from exchange rate risk emanating from oil price shocks. The government should also encourage the use of renewable energy such as solar to help reduce the countryÔÇÖs dependence on oil.