Abstract
This paper tests the McKinnon complementarity hypothesis between money and investment in Ghana in a Vector Error Correction framework. The findings reveal that investment has a positive relationship with money demand, whilst domestic credit positively influences investment, suggesting complementarity between money and investment. However interest rate does not significantly influence money demand. In the short-run, though the interest rate has a positive relationship with investment it negatively influences money demand contrary to the McKinnon postulations. Hence the relationship between money and investment could not be attributed to a savings effect from an increase in money balances and interest rate liberalization.
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