This paper investigates the effects of exchange rate distortion on economic growth in a Less Developed Country (LDC)—Ghana. Using time series data from Ghana and a five equation simultaneous model, we find that exchange rate distortion, as measured by the black market premium, has a deleterious effect on economic growth rate. The negative effect is imparted through reduced investment and a constriction of international trade. The results imply that liberalized exchange rate policies will enhance the growth prospects of LDCs, especially those in Sub-Saharan Africa. [F 31, O 55].
All Science Journal Classification (ASJC) codes
- Economics, Econometrics and Finance(all)