The effect of inflation on economic growth in Ghana, 1995-2019: Post democratic analysis

Yenube Clement Kunkuaboor Yenube Clement Kunkuaboor,Fatawu Abdul-Seidu Fatawu Abdul-Seidu,Moisob Adamu Moisob Adamu,Miilon Sommik-Duut Miilon Sommik-Duut

doi:10.30574/wjarr.2021.12.3.0660

Yenube Clement Kunkuaboor Yenube Clement Kunkuaboor, Fatawu Abdul-Seidu Fatawu Abdul-Seidu + Show 2 more

Open Access

https://doi.org/10.30574/wjarr.2021.12.3.0660

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Abstract

Background: One of the fundamental goals of macroeconomic policy in many nations, both developed and developing, is to foster economic development while keeping inflation low. There has been a debate as to whether inflation impacts negatively on economic growth or rather promotes economic growth. The study is motivated by this controversy and used time-series data from 1995 to 2019 in Ghana to examine the relationship between inflation and economic growth, establish the long-run effect and also test whether there exists a causal effect between inflation and economic growth. Method: The review utilized Ordinary Least Square (OLS) regression examination to inspect the impact of inflation on economic growth and while long run co-integration relationship was additionally decide utilizing Fully Modified (FM-OLS) regression analysis. Granger causality was investigated to see if there is a causal impact among inflation and economic growth. Model diagnoses were performed to discover the strength of the discoveries where autocorrelation, multicollinearity, normality test and heteroscedasticity were tested. Results: The review uncovered that, inflation has a negative measurably irrelevant impact on economic growth at 5% basic level. The concentrate likewise uncovered that there was co-integration relationship between inflation and economic growth during the time of viable 1995-2019. There was no causal impact among inflation and economic growth, in this way neither inflation nor economic growth Granger-Causes the other. The study suggest that inflation targeting ought to be the best financial approach measure for economic growth by keeping up with the rate at 8+/-2%.

Highlights

The sustainability of economic growth and economic development is pivotal in macroeconomic decisions and policy initiations of the most country [10]
The study is motivated by this controversy and used time-series data from 1995 to 2019 in Ghana to examine the relationship between inflation and economic growth, establish the long-run effect and test whether there exists a causal effect between inflation and economic growth
Economic growth can be explained as Gross Domestic Product (GDP) which is equal to the sum of personal expenditure, plus domestic investment, Government expenditure, net exports of goods and services within an economy [3]

Summary

Introduction

The sustainability of economic growth and economic development is pivotal in macroeconomic decisions and policy initiations of the most country [10]. This perception does not go without drawing inflation into the picture as an essential ingredient in the fight to grow and sustain the economy by Sattarov. Economic growth can be explained as Gross Domestic Product (GDP) which is equal to the sum of personal expenditure, plus domestic investment, Government expenditure, net exports of goods and services within an economy [3]. The mixed results mostly found in the literature is because the researchers do not come into agreement that inflation economic growth relationship is due to countries specific features [4]. The study is motivated by this controversy and used time-series data from 1995 to 2019 in Ghana to examine the relationship between inflation and economic growth, establish the long-run effect and test whether there exists a causal effect between inflation and economic growth

Methods

Results

Conclusion