Inflation In Ghana Research Articles

Exchange Rate Pass-Through to Domestic Inflation in Ghana

The current study estimates the exchange rate pass-through on domestic prices from January 2013 to December 2018, using a recursive vector autoregressive model (VAR). Applying Cholesky decomposition to the model, six variables were ordered as follows: oil prices, output gap, exchange rate, import prices, overall inflation and Treasury bill rate with an assumption that the identified shocks contemporaneously impact variables which are ordered after the shock without any contemporaneous feedback. We find evidence of incomplete exchange rate pass-through to domestic prices. Thus, domestic price changes by 9.6 percent in the first three months following an exchange rate shock and the shock dies out after a year with a total pass-through effect of 10.7 percent. We also find that, exchange rate effect is more pronounced for the imported prices than the overall inflation, suggesting some moderation of pass-through effect in domestic price dynamics.

Fiscal Deficits and Inflation in Ghana

The Ghanaian economy has been faced with persistent fiscal deficits over the years and this affects other macroeconomic variables like inflation. This study therefore empirically examines the effect of fiscal deficit on inflation in Ghana. The study deployed a quantitative research design technique, the Autoregressive Distributed Lag (ARDL) cointegration test, and vector error correction models using annual data spanning 1976 to 2019 with 44 observations. Findings revealed that there is a significant and negative short and long-run relationship between fiscal deficits and inflation in Ghana, with unidirectional causality running from inflation to fiscal deficit. The study recommends that the Government of Ghana should endeavour to finance fiscal deficits mostly through external sources and non-banking methods like the issuance of bonds at the foreign financial market since non-banking borrowing has low inflationary effects.

The Effect of Monetary Policy on Inflation in Ghana

The Effect of Monetary Policy on Inflation in Ghana

Economic Growth Implications of Inflation Targeting and Inflation Volatility: An Emerging Economy’s Perspective

Purpose: The purpose of this study was to comparatively examine the extent to which inflation targeting and inflation volatility impact on economic growth from an emerging economy’s perspective.
 Methodology: Annual data from the World Development Indicator (WDI) and the Bank of Ghana (BoG) from 1985 to 2014 were used for the study. The data was interpolated into quarterly series using E-views. The stationarity characteristics of the variables were tested using the Augmented Dickey-Fuller and the Phillip-Perron unit root tests. The GARCH (1 1) and ARDL models were employed for the analysis.
 Findings: The study found that inflation targeting had a positive significant effect on economic growth in Ghana. Also, despite the volatile nature of inflation in Ghana, inflation volatility had no significant effect on economic growth.
 Implications: This scholarly work would aid policy makers in policy formulation pertaining to inflation targeting and inflation volatility on economic growth. It will also open up the circles of knowledge regarding inflation targeting monetary policy’s regime in empirical literature, institutions of higher learning and the understanding of the general public. The study recommends that the Bank of Ghana maintains its current monetary policy framework - Inflation Targeting, but should strengthen the preconditions and subsequent requirements of the monetary policy in order to maximize the gains to economic growth.

Exchange Rate Pass-Through to Domestic Inflation in Ghana

Exchange Rate Pass-Through to Domestic Inflation in Ghana

Investor Attention and Equity as a Hedge against Inflation in Ghana

The flow of relevant market information for investment decision making has increased due to increase in access. Investors are, however, time-constrained in effort and cognitive resources to process market information. The basic capital asset pricing model based on the efficient market hypothesis assumes that all market information on securities is incorporated into prices instantaneously. However, the situation is different in real-life situations because, in some cases, some investors possess little information about the market. This study examined the effect of active investor attention (Google Search Volume) and inflation on Ghana’s stock market returns for the period September 2005-December 2019 (monthly data). Through co-integration and the VECM technique, we established a long-run relationship among the variables. The study also found a positive and significant relationship between active investor attention (Google Search Volume), inflation, and equity returns in Ghana. The results from the VECM are further confirmed by ARCH and GARCH models as a robustness check. The findings demonstrate that in Ghana, equity serves as a hedge against inflation.

Impact of Inflation on Gross Domestic Product Growth in Ghana

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.

The Relationship between Interest Rates and Inflation in Ghana and Their Impact on Economic Growth for the Period 2006-2019

High interest rates and high inflation rates have been the bane of many developing countries especially in Sub Saharan Africa. The researcher sought to determine the relationship between these two variables and their resultant effect on the economic growth of Ghana over last fourteen years. Changes in interest rates within the period were compared with changes in inflation rates. These figures were used to determine the coefficient of correlation between these variables. The changes in these two variables were also compared with the changes in the economic growth rate within the period to ascertain any relationship between them. The research showed that interest rates and inflation rates in Ghana were positively correlated and they had strong impact on the economic growth of Ghana within the period under review. The researcher, however, observed that the coefficient of correlation between interest rates and inflation rates from 2006-2015 was stronger than from 2016-2019.

Interest rate, inflation and stock market performance in Ghana : a sector based vector error correction model perspective

No AccessInterest rate, inflation and stock market performance in Ghana : a sector based vector error correction model perspective Ebenezer Larbi Asiedu Daniel Mireku-Gyimah Kofi Kamasa Henry Otoo Ebenezer Larbi Asiedu0 Search for more papers by this author Daniel Mireku-Gyimah0 Search for more papers by this author Kofi Kamasa0 Search for more papers by this author Henry Otoo0 Search for more papers by this author Affiliations 0University of Mines and Technology, Ghana Published Online:1 Mar 2021https://hdl.handle.net/10520/ejc-aa_ajber_v16_n1_a8SectionsPDF ToolsAdd to favouritesDownload CitationsTrack Citations ShareShare onFacebookTwitterLinked InRedditGMailHotmailYammer AboutAbstractThis paper sought to examine the effect of inflation and interest rate on stock returns in Ghana at the sectoral level using monthly data from 2010 to 2016. By employing the Johansen cointegration technique as well as the Vector Error Correction Model (VECM) estimator, the results reveal a negative and significant effect of inflation and interest rate on the overall stock market performance in the long run. In specifics, the sector that is highly affected by inflation changes is the petroleum sector, followed by the consumer staples sector, financial sector and mining sector. With regards to interest rate, consumer staples sector is the most affected, followed by financial sector and mining sector. The paper therefore recommends for prudent macroeconomic policies in the areas of interest rate and inflation in Ghana to derive maximum benefits from the stock markets. Previous article Next article FiguresReferencesRelatedDetails None Volume 16, Issue 1 | Mar 2021 AffiliationAdonis & Abbey PublishersThe International Bibliography of Social Sciences (IBSS)EnglishBusiness and FinanceInternational JournalsAccreditationThe International Bibliography of Social Sciences (IBSS)LanguagesEnglish InformationCopyright © 2021, Adonis & Abbey Publishers:All rights reservedKeywordsInterest ratesStock marketinflationVector Error Correction ModelCointegration Disclosure The authors confirm that the manuscript has been read and approved by all named authors and that there are no other persons who satisfied the criteria for authorship but are not listed. The authors confirm that they have given due consideration to the protection of intellectual property associated with this work and that there are no impediments to publication, including the timing of publication, with respect to intellectual property. Ethical conduct of research The authors state that they have obtained appropriate institutional review board outlined in the Declaration of Helsinki for all human or animal experimental investigations. A signed informed consent document has been obtained from all participants included in the study.

Public debt and inflation: empirical evidence from Ghana

ABSTRACT This paper investigates the impact of public debt on inflation in Ghana using annual data during the period 1983–2018. The study uses the Autoregressive Distributed Lag (ARDL) bounds testing approach to cointegration and an error correction model to examine this linkage. The cointegrating regression results reveal evidence of a stable long-run relationship between inflation and the explanatory variables in the presence of a structural break. The findings also show a positive and significant impact of public debt on inflation. These results were found to hold, irrespective of whether the regression was conducted in the short run or in the long run. The study confirms the presence of the inflationary effects of public debt in Ghana. The government should, therefore, be prudent when considering increases in public debt to minimize volatility in inflation and its associated risks to the economy.

Testing for asymmetry in monetary policy rule for small-open developing economies: Multiscale Bayesian quantile evidence from Ghana

Ghana’s consumer inflation has remained persistently high above its medium-term target despite officially practicing inflation targeting regime for over a decade. This paper examines how the Central Bank of Ghana has reacted to deviations of inflation and output gap from their respective desired levels over the past one and half decades. Primarily, it ascertains whether monetary policy in Ghana can be more precisely described by either (i) the standard linear Taylor rule, or (ii) an augmented linear rule including exchange rate or (iii) a nonlinear augmented threshold rule. The paper applies versions of frequentist and Bayesian quantile regressions at both time- and multiscale domains along with the standard threshold regression framework. The basic result is that the augmented nonlinear (threshold) Taylor rule describes the dynamics of interest rate settings in Ghana better than the linear rule. There is high degree of monetary policy inertia and an overriding aversion for rising inflation (above target). The authority shows greater tendency to react strongly to above-target inflation in the medium-to-longer term than in the short-term. We find that the Bank of Ghana is more aggressive toward inflation than output growth and does not react to the real economy independently from its concerns about inflation. The exchange rate has important influence on interest rate in the low inflation regime. We find an accommodative policy response to positive deviation of inflation from target even at the long run. Such policy passivity possibly underpins the persistently high inflation in Ghana as other policy interventions have not succeeded in taming inflation over the years.

The effect of crude oil price shocks on macroeconomic stability in Ghana

AbstractThe paper studies the effects of underlying shocks of crude oil price movements on the stability of macroeconomic aggregates in Ghana. We develop a structural vector autoregressive to disentangle the sources that have driven shocks in crude oil market and estimate the effects of the identified shocks on macroeconomic aggregates and on three bilateral exchange rates in Ghana. In addition, we investigate the extent of transmission of the identified shocks on food and non‐food price levels. The findings show that shocks by oil supply and demand‐specific have a significant effect on real GDP. Further, the identified shocks have a weighty effect on the Ghana/Euro bilateral exchange rate. The findings also suggest that all the identified structural shocks have significant effects on food and non‐food inflation. This implies that oil market shocks are detrimental to food and non‐food inflation in Ghana.

A MONETARY ANALYSIS OF GHANA: EXAMINING THE IMPACT AND THE CAUSAL RELATIONSHIP BETWEEN MONETARY POLICY AND INFLATION IN GHANA

Purpose: The main objective of the study was to examine the impact and the causal relationship between monetary policy and inflation in Ghana.Methodology: Annual time series data spanning from 1985 to 2017 with Auto Regressive Distributed Lagged (ARDL) model were employed for the analysis.Findings: The outcome from the study shows that, monetary policy rate had insignificant negative relationship with inflation in both the short and the long run. Again, interest rate, domestic investment and money supply were found to have significant positive impact on inflation in both the long and the short run for a specific period chosen for the study.The causal relationship shows that monetary policy rate granger causes money supply within the period understudyUnique contribution to theory and practice: The study recommends that policy makers need to keenly consider the levels of money supply in Ghana so as to ensure a stable retail price levels. The Government of Ghana needs to evaluate the prevailing levels of retail prices and set the interest rates on the 91-day Treasury bills because they are majorly treated as risk free rate hence determines other interest rates and inflation levels in Ghana.

Monetary policy and trade openness in Ghana

Monetary policy is one of the key drivers of economic growth in most economies and through its impact on economic variables. The objective of this study is to analyse the effectiveness of monetary policy in Ghana taking into account the role of trade openness and trade policy in influencing the effectiveness of monetary policy. The study employed the co-integration approach with quarterly data from 2002 to 2016 to assess the relationship between trade openness and effectiveness of monetary policy in affecting inflation and output. The empirical result revealed that as the degree of trade openness increases, monetary policy become less effective in reducing the rate of inflation and causes domestic output to decline in the long-term. Though the results of the study confirmed the theoretical relationship between trade openness and inflation and output, the results indicated that when monetary policy is taken into account, negative effect of trade openness on inflation is reduced. The ability of trade openness to reduce inflation level in Ghana is hindered by increases in the monetary policy rate. Thus, the results implies that trade openness hinders monetary policy’s ability to curtail inflation in Ghana whilst it is able to effectively cause output to decline. Keywords: Monetary Policy, Inflation, Output, Trade Openness, Co-integration

Dollarization, Inflation Targeting, and Inflationary Dynamics in Ghana

ABSTRACTThe impact of dollarization on domestic economic performance, and the welfare implications of high inflation in an inflation targeting environment, have remained a matter of much concern for policymakers in recent years. This study investigates the effects of dollarization on inflation and inflation uncertainty in Ghana for the period January 1990 to December 2017. We apply the exponential Generalized Autoregressive Conditional Heteroskedasticity model together with impulse response and Granger causality tests to explore how dollarization affects the behavior of inflation for the pre-inflation targeting period (January 1990 – May 2007) and post-inflation targeting period (June 2007 – December 2017). The results indicate that dollarization has not played a significant role in the volatility of inflation in Ghana. Also, inflation Granger causes dollarization in both the pre- and post-inflation targeting regimes. Finally, there is a bidirectional causal relationship between inflation and inflation uncertainty following the adoption of inflation targeting monetary policy. We conclude that, although inflation targeting has not presented a significant impact on inflation volatility, it has affected the relationship between inflation and inflation uncertainty in Ghana. The dynamics of inflation volatility and asymmetries present crucial implications which are discussed to guide policymaking.

Modeling And Forecasting Ghana’s Inflation Rate Under Threshold Models

In this study, we model and forecast Ghana’s inflation rate using nonlinear models between the period January 1981 and August 2016. Nonlinearity tests were conducted on the logarithm of the monthly rates of inflation using Keenan and Tsay tests, and based on the results, we rejected the null hypothesis of linearity of monthly rates of inflation. We used threshold models and compared their fitness and forecasting performance with standard linear Autoregressive (AR) models. We found out that the Self-Exiting Threshold Autoregressive (SETAR) and Logistic Smooth Threshold Autoregressive (LSTAR) models fit the data better. The simple linear Autoregressive (AR) models however, out-performed the nonlinear models in terms of forecasting. Various research projects have been carried out in this area of inflation modeling in Ghana, but these researchers modeled inflation in Ghana using nonlinear models that did not account for the conditional heteroscedasticity in the model. These models have been used and empirical evidence of their relative performance has been given for the success of developed economies such as US and Europe. However, limited studies have been done in the case of Ghana. This indicates a gap in the literature and poses a challenge as to which of these models is the optimal choice for modeling economic and financial data such as inflation rates for developing countries. It is recommended that policy makers, industry players and all those interested in modeling future rates of inflation in Ghana should consider using the threshold models instead of the traditional Box and Jenkins models since the threshold models are able to capture the heteroscedasticity in the model. Also by using the threshold models, policy makers and industry players would be able to properly capture the variability persistence in the monthly rates of inflation and hence estimates would be more accurate. Lastly, from the upward trend of the out-sample forecasts, it can be predicted that Ghana would experience double digit inflation in 2017. This would have several impacts on many aspects of the economy and could erode the economic gains made in the year 2016.

The transition probabilities for inflation episodes in Ghana

PurposeFollowing the reforms in monetary policy and shift in fiscal policies, it is logical to presume that these reforms may cause a significant structural change in the dynamic processes of inflation and hence affect the nature of inflation persistence. The purpose of this paper is to examine the persistence nature of the different inflation episodes while controlling for the effects of demand- and supply-side factors, which are modeled as regime-dependent.Design/methodology/approachThis paper used the Markov-switching dynamic regression and annual time series data.FindingsThe results showed that high inflation regime is more persistent than low inflation regime, with a respective average duration of an escape of 3.5 and 2.57 years, which suggests that price stability achievements are less sustainable. In both regimes, demand- and supply-side factors play significant roles in driving inflation, but the effect of the latter dominates. Thus, on the argument of whether inflation in Ghana is structural or monetary, the results support the former. The roles of both structural and monetary factors have changed over time, but that of the former has been more significant and important in Ghana.Originality/valueThis study provides the first empirical attempt, in the case of Ghana, that examines the persistence nature of different inflation regimes, while modeling the effects of supply and demand factors as regime dependent. In the modeling sense, the authors also contribute by ruling out the assumption that the researcher knows the processes responsible for each observation at each point in time.

Influencers of Inflation in Ghana

The effects of inflation on the economic life of the citizenry of a country and the theoretical causes have led to numerous researches in the area. Annual inflation rates in Ghana since 1990 show a fluctuating trend depicting how unsuccessful various governments and policy-makers have battled with changes in the general price level. The theoretical and empirical literature on inflation seem to suggest that the causes of inflation are multifaceted, and time specific, as well as dependent on the level of development of a country. This paper attempts to explore some of major triggers of inflation Ghana for decision-making and implementation as well as adding to existing researches in the area. It uses multiple linear regression analysis based on structural equation modelling through path analysis. It concludes that interest rate, proxied by Treasury bill rates, is the only major variable that has a positive and significant effect on inflation in Ghana with regard to the time period studied. Factors such as GDP growth, market capitalisation, gross fixed investment, and foreign direct investments proved insignificant in influencing inflation in Ghana. This study lends support to the fact that inflation reacts positively to changes in interest rates, therefore, governments and policy-makers must consider it critical when pursuing propoor growth policies.

Public Sector Wage and Inflation in Ghana

Achieving price stability has been in the orbit of concern of state authorities for time immemorial. This paper is therefore focused on determining empirically the impact of public wage bill on inflation in Ghana for the period of 1986-2014. Using an Autoregressive Distributed Lag (ARDL) to cointegration model, it was discovered from the study that public wage bill, currency depreciation rate, money supply, and fiscal deficit all have significant impact on inflation in Ghana. The outcome of this study postulates that the rate of inflation determination in Ghana is also a fiscal phenomenon in spite of the significant and domineering role played by monetary expansion. Consequently, equal attention must be accorded both fiscal and monetary policy in the fight against the rate of inflation in Ghana for appreciable and sustained result.

Demand for Money, Structural Break and Money's Role in Monetary Policy in Ghana: An Empirical Evidence

We examine the (in)stability of real money demand function and the relevance of money in the contemporary monetary policy framework in Ghana. Both Bai-Perron (2003) structural stability and Quandt-Andrews unknown break tests were applied to ascertain possible structural breaks in Ghana’s money demand function, while impulse responses and variance decomposition techniques based on structural VAR framework were employed to determine the pass through of money demand growth to inflation and exchange rate. Our empirical results showed evidence of an unstable money demand function for Ghana over the sample period (1996Q1 – 2015Q2). In spite of the observed instability, Ghanaian demand for money was found to be positively affected by real income, exchange rate depreciation and financial innovation, but negatively influenced by interest rates (both foreign and domestic) and real dollarization. The study also uncovered that growth in money demand has a strong indirect positive impact on inflation, principally via the exchange rate channel. Our empirical results remit cogent policy proposition that money still contains useful information for future prediction of inflation in Ghana. The empirical findings thus proffer strong support for a continuous monitoring of the monetary aggregates (alongside other real sector and financial information) in order to rein in inflation in Ghana.