Exchange rate, price - incentive to Smuggle and Cocoa Beans export in Ghana

Abstract

The study sought to empirically examine the effects of real exchange rate on price incentive to smuggle and the effect of price-incentive to smuggle on cocoa beans export in Ghana. Autoregressive Distributed Lag model (ARDL) was employed in analyzing the data. The study used secondary data from 1986 to 2016, gathered from sources including the Food and Agricultural Organization, World Development Indicators, Institute of Statistical, Social and Economic Research, and the International Monetary Fund. The study found that price-incentive to smuggle is influenced by the real effective exchange rate. Accordingly, appreciation of the exchange rate reduced the price-incentive to smuggle while depreciation increased it. Also, the study showed that cocoa beans export was negatively influenced by price-incentive to smuggle, implying that, an increase in the price-incentive to smuggle reduced the volumes of cocoa beans export. As depreciation in the exchange rate increased the price-incentive to smuggle, the latter in turn reduced the volumes of cocoa beans exports. The study therefore recommends that COCOBOD must correctly forecast exchange rates movements to avoid wide differences between the prices of cocoa in neighboring countries which creates the incentive to smuggle.