Impact of Inflation on Gross Domestic Product Growth in Ghana

Abstract

This paper examines the impact of inflation and other macroeconomic variables such as physical capital, government expenditure, and money supply on GDP growth in Ghana. The study obtained data from the World Development Indicators for the period 1986-2018 and employed vector autoregressive (VAR) models for the analysis. The results showed that general inflation, low inflation rates, physical capital, and money supply have positive, statistically, significant, effect on GDP growth, while, government expenditure and high inflation have negative, statistically significant, effect on GDP growth for the period studied. The study concludes that GDP grows positively at a general level of inflation and low rates of inflation but grows negatively at a high rate of inflation in Ghana. The study, therefore, recommends that government should implement monetary and fiscal policies that will help keep inflation rates low and redirect her spending to the productive sectors in the country to enhance GDP growth.