This study examines the dynamic connectedness between public debt, exchange rate, credit rating, and economic growth in Ghana using Time-Varying Parameter Vector Autoregression framework. The analysis utilised monthly data spanning from December 2012 to January 2024. The results reveal that connectedness among Ghana's macroeconomic variables is crisis-driven. Exchange rate emerges as the dominant shock transmitter across both domains, while GDP per capita consistently acts as a net recipient. Notably, public debt exhibits contrasting spillover roles, functioning as a net recipient of shock in the time domain but as a net shock transmitter in the frequency domain. Also, credit rating emerged as a moderate shock transmitter in both short and long-term frequencies. The study recommends prioritising short-term volatility management, coordinated fiscal-monetary frameworks, and enhanced debt communication strategies. These findings provide valuable insights for policymakers, central bankers, and investors in designing effective macroeconomic policies for small open economies.
Oppong et al. (Thu,) studied this question.