A Modelling Of Ghana'S Inflation Experience: 1960-2003

Abstract

This paper examined the causes of inflation in Ghana between 1960 and 2003. Stylized facts about the inflation experience indicated that following the exit from the West African Currency Board inflation management had been ineffective despite two decades of vigorous reforms. Using the Johansen cointegration test and an error correction model the paper identified inflation inertia, changes in money supply, changes in Government of Ghana Treasury bill rates as well as changes in exchange rate as determinants of inflation in the short-run. Inflation inertia was found to be the dominant determinant of inflation in Ghana. These findings suggest that to make Treasury bill rates more effective as nominal anchor inflation expectations ought to be reduced considerably.