Abstract
Ghana has been confronted with series of economic problems to the extent of calling on the IMF for a bailout after every eight years. This situation has persisted in spite of various monetary authority stabilization policies. This paper therefore focuses on investigating the games of monetary policy, inflation and economic growth of the Ghanaian economy for the period of 1982-2017. Using Autoregressive Distributed Lag (ARDL) to cointegration model, it was revealed from the study that in the long run interest rate significantly influences economic growth but in a negative direction, implies that a higher interest rate has the tendency to restrained economic growth and inflationary pressures. In relation to exchange rate, the long run result indicates an insignificant negative effect on economic growth. The general results suggest that macroeconomic variable which influences economic growth is interest rate and exchange rate. This is evidence that macroeconomic instabilities have significant effect on economic growth. This therefore calls for fiscal discipline and autonomy power to the Bank of Ghana with less interreference from the government to enable the smooth implementation of monetary policies without any string of politics attached.
Highlights
Stabilization of a nation’s economy is the priority of every government
In the long-run, it was revealed from Table 4 that the coefficient of interest rate and inflation revealed a negative impact on economic growth with interest rate having a significant influence on economic growth in the long run whereas inflation does not influence economic growth in the long run
The finding is in line with Adusei [35] who found that financial development weakens economic growth
Summary
Stabilization of a nation’s economy is the priority of every government. In any case, the soundness of every economy revolves around its economic and financial performance. Monetary policy alludes to the procedure by which the monetary experts of a country pedal the supply of money, regularly focusing on a rate of interest for the purpose of encouraging economic growth and stability. Folawewo and Osinubi, [1], clarified monetary policy as a mix of measures that intended to manage the value, supply and cost of money in an economy, in concordant with the expected level of economic activity. The targets of monetary policy include price stability, maintenance of balance of payments equilibrium, promotion of employment and output growth, and sustainable development
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