The Ghanaian economy experienced considerable turbulence following the COVID-19 pandemic and the Russia-Ukraine conflict. Despite the evident impact of these events, no study to date has quantified or clearly delineated their effects on Ghana’s financial markets. This study fills the gap by employing daily data from the Bloomberg Terminal within a Bayesian structural time series framework to quantify and compare the impacts of major crises, including the Global Financial Crisis (GFC), COVID-19, and the Russia-Ukraine war, on the performance of the Ghana Stock Exchange and Forex markets.
We employed the Bayesian Structural Time Series (BSTS) model to estimate the difference between the observed financial series and the counterfactual scenarios in order to quantify the pointwise or cumulative impact of the crises.
The findings reveal that both the GFC and the Russia-Ukraine war triggered significant depreciation of the Ghanaian cedi against the US dollar, by approximately 17% and 26%, respectively. In contrast, the COVID-19 pandemic triggered a 6% but insignificant depreciation of the Cedi. Moreover, COVID-19 led to a statistically significant 12% decline in market performance, while the Russia-Ukraine war resulted in a statistically insignificant decline of 4.7%. These findings highlight distinct sectoral vulnerabilities: the foreign exchange (Forex) market appears more responsive to financial and geopolitical shocks, whereas the equity market is more sensitive to health-related crises.
Ghana’s financial markets’ heterogeneous responses to these events underscore the need for crisis-specific policy frameworks to safeguard financial stability. Additionally, the results provide valuable insights for financial risk management strategies designed to mitigate the effects of current and future crises.
The novelty of this study lies in establishing not only the causal relationship between major crises and Ghanaian financial market performance, but also in quantifying and providing a basis for comparing the impact of these events on the Ghanaian financial market’s performance. More importantly, it provides insights into comparing the impact of health shocks and geopolitical risk on the Ghanaian financial market, particularly at a time when Ghana faces extreme financial constraints amidst heightened geopolitical tensions and the country’s exclusion from the international market.
