The Impact of Exchange Rate and Unemployment Rate on the Real Gross Domestic Product Growth Rate in Ghana

Unemployment Rate and Exchange Rate are perhaps the two most important challenges that face the Ghanaian economy in recent time. This study seeks to examine the effect of the Exchange Rate and Unemployment Rate on the Real Gross Domestic Product Growth Rate in Ghana. The study used secondary data collected from World Bank, International Labour Organization and International Monetary Fund covering the period 1999–2018. Real Exchange Rate and Unemployment Rate were the independent variables whilst Real Gross Domestic Product Growth Rate was the dependent variable. The findings of the study were arrived at using the quantitative research method. The extent and nature of relationship between the various variables under study were identified using Pearson correlation, regression and hypotheses. The study found out that Unemployment Rate exhibited insignificant negative relationship towards Real Gross Domestic Product Growth Rate, while Real Exchange Rate was positive and also insignificant relationship on Real Gross Domestic Product Growth Rate. Based on the linearity of the multiple linear regression model, the independent variables contribute to 15.0% of the overall LN_GDP. The study then concludes that based on the effect of Exchange Rate and Unemployment Rate on RGDPGR in the findings, Government and other stakeholders should take steps such as creating new local industries and factories, and invest in existing ones to increase domestic produce which will in turn decrease Unemployment Rate and increase Exchange Rate.

high unemployment in Ghana constitutes underutilization of both human and natural resources in the country, affecting the production of goods and services within the economy which has an effect on the country's GDP (Tetteh-Bator et al., 2018).
The problem the research seeks to address is the fact that stakeholders of the country are increasingly unable to manage the macroeconomic indicators so as to ensure an increasing or at least a constantly growing GDP rate. This has over the years from one regime to another brought the Ghanaian economy to its knees.

Exchange Rate
An Exchange Rate is the price of one currency, given in terms of another. The movement of a currency's value relative to others has a profound effect on economies exposed to this currency (Onwukwe, C. E., & Nwafor, G. O., 2014). Given the linked nature of modern economies, Exchange Rate movements have the power to intensively affect businesses, governments, and people around the globe. Exchange Rate control could be very costly, and even become pointless, when speculators attack a currency, even under government protection (Amoah, 2015).

Unemployment Rate
Unemployment Rate is the proportion of a country's labour force that is jobless, over its total population, expressed as a percentage. When the economy is in recession and jobs are scarce, the Unemployment Rate of a country can be expected to rise while when the economy is growing at a rate and jobs are relatively enough, the rate can be expected to fall. (Yarquah, A., John & Baafi-Frimpong, S., 2012;Baah-Boateng, A, W. P., & Oduro, A. D., 2013)

Gross Domestic Product (GDP)
Gross Domestic Product is the value of all final goods and services produced within a country or an area during a period. It is often considered the best standard of measuring national economic conditions (Mankiw & Taylor 2007). Amoah (2015) established that Real Exchange Rate is inversely related to GDP in the long term. This implies that the long run effect of increases in Real Exchange Rate generates decreases in GDP while a decrease Real Exchange Rate brings about an increase in GDP. Soylu, Ö. B., Çakmak, I., & Okur, F. (2018) established that in the Eastern European countries, Unemployment and GDP are directly related. This implies that when Unemployment increases, economic growth (GDP) will also increase and when Unemployment decreases, Economic growth (GDP) will also decrease. This is however, not so in many of the developed and developing countries.

Multiple Linear Regression
Multiple linear regression was used in this study to model the relationship among the dependent variable (LN_GDP) and the independent variables (LN_EXR and LN_UNR) with the help of SPSS and the research data.

Definition of Variables Dependent Variable
In order to examine the impact of Exchange Rate and Unemployment Rate on the Real Gross Domestic Product Growth Rate of Ghana, Gross Domestic Product is used as the dependent variable. This variable is consistent with (Agalega & Antwi, 2013) and (Amoah, 2015) studies where GDP was used as dependent variable in modeling GDP using Vector Autoregressive model. This variable is defined as the value of all final goods and services produced within a country or an area during a period.

Independent Variable
With regards to the independent variable, I used both Exchange Rate (EXR) and Unemployment Rate (UNR) as the independent variables. Exchange Rate (EXR) is defined as the price of one currency, given in terms of another. Unemployment Rate (UNR) is defined as the share of the labour force over a country's population that is jobless, expressed as a percentage of the entire population.

Pearson Correlation
Pearson correlation which is a parametric correlation is used in this study to measure the strength and direction of the relationship that exists among the microeconomic variables employed. Table 4.1 present regression results for the selected major macroeconomic indicator studied in the years 1999-2018 where LN_GDP is the dependent variable. The results show that LN_UNR affects LN_GDP negatively. LN_UNR β coefficient is -0.750, which means that one-unit increase in LN_UNR decreases LN_GDP by 0.750 units whilst LN_EXR is held constant. LN_EXR has a positive β coefficient of 0.769. This means that one-unit increase in LN_EXR will lead to an increase in LN_GDP by 0.769 units, holding LN_UNR constant. According to the model, LN_UNR has a P-value of 0.083 and LN_EXR also has a P-value of 0.165, both variables have Pvalues greater than 0.05 which means they are statistically not significant to the model. LN_GDP is also positively correlated with Exchange Rate, LN_EXR, therefore, the null hypothesis is rejected. The above results also show an insignificant negative relationship between LN_GDP and LN_UNR with a correlation coefficient of -0.381. Correlation result between LN_GDP and LN_EXR indicate that there is an insignificant positive relationship between the two variables with a correlation coefficient of 0.295. The correlation results between LN_UNR and LN_EXR shows a significant positive relationship with a correlation coefficient of 0.031, hence, the null hypothesis is rejected.  Figure 4.1 shows time series plot for the annual LN_GDP in Ghana over the sampled twenty-years period. It shows that the data has a fluctuating trends, though generally increasing, it increased to a point and then decreases drastically.

The Impact of Unemployment Rate On the Real Gross Domestic Product Growth Rate of Ghana.
From the findings, the coefficient of Unemployment Rate is -0.390 with a P-value of 0.083. This indicates an insignificant negative relationship between LN_UNR and LN_GDP which means, holding all other variables constant LN_GDP will fall by approximately 0.390 units for a unit increase in LN_UNR. This is consistent with studies by Mosikari (2013). From the definition of unemployment rate in this study, the problem of unemployment is as a result of insufficient jobs or employment opportunities. The number of trained personnel (employees) increases rapidly from year to year which seems not to match the increment in the number of employment avenues or job opportunities generated in the economy. The deficit of this mismatch is captured as unemployed personnel.

The Impact of Exchange Rate on The Gross Domestic Product of Ghana
From the findings, the coefficient of Real Exchange Rate is 0.307 with an P-value of 0.165. This shows an insignificant positive relationship between LN_EXR and LN_GDP which means, holding all other variables constant, a unit rise in LN_EXR will cause LN_GDP to rise by approximately 0.307 units. Exchange Rate is defined in this study as the price of one currency in terms of another, importation is one of the major causes of increased Exchange Rate. It would have been expected that GDP and exchange rate would relate inversely since increase GDP is likely to generate increase exportation and decrease importation. Due to this positive relationship between exchange rate and GDP, the study revisited the nation's factors production. As an agrarian country, the study directed its lenses on agriculture and noticed that the major cause of this adverse relationship is the high importation of various agriculture inputs, implements and equipment. Except for cocoa farmers, most of these implements and equipment are allocated to people who can afford to pay for them and not necessarily those who need them for production. This ability to pay principle of distribution machinery and other inputs might have caused the wastage and thus drove the indicator adversely. When imported inputs are channeled to the appropriate users, the economy can achieve the desired inverse relation between Exchange Rate and GDP growth rate.

The Impact of Exchange Rate on The Unemployment Rate of Ghana.
From the findings, the corelation between LN_EXR and LN_UNR is 0.031. This shows a positive relationship between LN_EXR and LN_UNR which means, for every unit increase in LN_EXR, LN_UNR will also increase by 0.031.

Summary of Findings
The study found out that the independent variables thus, Exchange Rate (LN_EXR) and Unemployment Rate (LN_UNR) contribute approximately 0.15 to Real Gross Domestic Product Growth Rate in Ghana. From the findings, LN_EXR positively and insignificantly affects the Real Gross Domestic Product Growth Rate in Ghana for the period of this study. On the other hand, LN_UNR affects the LN_GDP negatively and insignificantly for the period of this study. These relationships indicate that a unit increase in LN_EXR will cause LN_GDP to also increase but a unit increase in LN_UNR will cause LN_GDP to decrease.

Conclusions
This study has shown that Real Exchange Rate has a positive but insignificant effect on the real gross domestic products growth rate in Ghana. This agrees with research done by Amoah (2015), Razzaque, Bidisha and Khondker (2017) and Mwinlaaru and Ofori (2017) where a positive relationship was found to exist between Exchange Rate and real gross domestic product growth. This notwithstanding, an increasing real GDP should influence a decrease Exchange rate rather than increase it. LN_UNR's negative insignificant effect on the Real Gross Domestic Product Growth Rate in Ghana is technically normal. This also agrees with the study by Soylu et al. (2018) where a positive relationship was found to exist between GDP and Unemployment Rate. They further explained that, 0.08% fall in Unemployment Rate will lead to a rise in the GDP by 1%.

Recommendations
Based on these findings, the study recommends that the Government and other stakeholders should take steps such as creating new local industries and factories, and invest in existing ones to increase domestic produce which will in turn increase Real Gross Domestic Product Growth Rate. Agriculture inputs should be directed to the appropriate users or placed in pools at various locations so as to minimize wastage, smuggling, prestigious possession of these equipment by non-farmers. This will also help increase GDP as well as decrease Exchange Rate and Unemployment Rate. The study also recommends that further research be conducted on the same topic with different economic variables and extend the years of the sample.