Monetary policy, inflation, economic growth, ardl, ghana 1. Pdf the impact of inflation on economic growth in ghana. Threshold effects of inflation on economic growth in africa. This paper therefore focuses on investigating the games of monetary policy, inflation and economic growth of the ghanaian economy for the period of. This paper concludes that the effect of foreign aid on economic growth is positive, permanent, and statistically significant. Financial development and economic growth in ghana.
Economic fluctuations and growth, monetary economics data for around 100 countries from 1960 to 1990 are used to assess the effects of inflation on economic. Ghana is located near the golf of guinee and the atlantic ocean, and it is spread on a surface of 238,535 km. An analytical study of the impact of inflation on economic. Using ols, adf and granger causality, aminu and anono 2012 also studied the effect of inflation on economic growth and development in nigeria. There is a common belief that inflation at a mild level is necessary for economic growth in developing countries. Impact of macroeconomic factors on economic growth in. Dickson akoto, the relationship between interest rates and inflation in ghana and.
Based on the performed growth regressions, we predict ghana s future growth potential for di erent scenarios. The main objective of this paper was to identify the key determinants of inflation in ghana using the most recent monthly data from january 2000 to december 2014 data period of 180 months. In spite of the diverse major issues affecting the economy of ghana over the years, the economy continues to experience a downward spiral in its economic growth. Are inflation, exchange rate, stock prices, money supply, and monetary policy rate determinants of economic growth in ghana. The effect of foreign aid on economic growth in developing.
In a baseline scenario, where investment, natural resources, government expenditures and other covariates are assumed to remain at the level of 200509, we nd that average growth rates are slightly above 4% in the upcoming two decades. In any case, the soundness of every economy revolves around its economic and financial performance. Section four addresses issues on the analytical framework and methodology, while section five presents the analysis of the empirical results, conclusion. Economic growth is a sustained increase in a countrys national income or. This move in monetary policymaking is firmly rooted in the belief, shared by. The determinants of economic growth in ghana munich personal. Economic growth in ghana over the period 1975 to 2015.
Ghana s economy expanded at the fastest rate in five years in 2017 as oil and gas production surged. Inflation, growth, monetary policy, threshold effect, developing. Apart from physical capital, human capital, inflation and debt servicing, the. It is against this backdrop that this empirical assessment sought to find out both direction and magnitude between the relevant dependent and independent variables that constitute the model over 1986 2015 sampled periods. Taking into account three opining views regarding government spending and economic growth, this study sets to investigate the causal nexus fractious and economic growth in ghana. The time series yearly data for inflation and economic growth gdp from 1990 to 2017 were used for the study. Therefore, the primary cause of poor macroeconomic performance such as per capita gross domestic product gdp and inflation rate in ghanaian economy of the. Stylized facts about inflation and economic growth in africa table 1 and appendix 6 present inflation and growth experiences in africa.
The economy of ghana has a diverse and rich resource base, including the manufacturing and. A regional analysis of inflation dynamics in ghana international. The main objective of this study is to investigate the effect of interest rate, inflation rate, and gdp on real economic growth in ghana over the period 19802012. Monetary policy alludes to the procedure by which the mone. This situation has persisted in spite of various monetary authority stabilization policies. The effect of inflation on economic growth in tanzania.
Inflation is a problem because, ceteris paribus, it lowers real incomes, discourages savings, makes. Consumers could benefit from lower prices as real income increases. However, whenever there is expected inflation, governments around the world take appropriate steps to minimize the ill effects of inflation to a certain extent. The method of analysis that was used is the bound testing procedure. Section 5 presents and discusses the empirical results, and section 6 gives concluding remarks. Ghana economic growth rate more than doubles in 2017 to 8. Motivated by this controversial, this study examined the impact of inflation on economic gro wth and established the existence of inflation growth relationship. Monetary policy in ghana has, over the years, focused on ensuring price stability or low inflation. The bone of contention is whether inflation is indispensable for growth. Apart from ghana, south africa and nigeria currently pursuing an inflationtargeting regime, most of the rest of african countries pursue a monetary targeting. Threshold effects of inflation on economic growth in africa african.
Country fact sheet on food and agriculture policy trends pdf. They found out that labour, capital investment and trade are important in explaining ghana s economic growth in the. This study sought to determine the impact of inflation on economic growth in zimbabwe. Ghana economic growth the growth outlook for 2020 was slashed again in april. Some stationarity and cointegration tests were carried out. Apart from ghana, south africa and nigeria currently pursuing an inflation targeting regime, most of the rest of african countries pursue a monetary targeting. Nonoil growth is expected to accelerate to 6% as the governments new policies in the agriculture sector. Endowed with gold and oil palms and situated between the trans saharan trade routes and the african coastline visited by successive european traders, the area known today as ghana has been involved in all phases of africas economic development during the last thousand years. The aggregate supplyaggregate demand asad framework also postulated a positive relationship between inflation and growth where, as growth increased, so did inflation. With this 2005 version of ghana s poverty reduction strategy papers, the nation is called upon to define anew the programmes of national development that it wishes to pursue in support of its current social and political aspirations.
The main thrust of the programme is growth and poverty reduction and implies that the government is not only concerned about poverty reduction, but also about sources of growth in. While some scholars, particularly those learning towards the keynesian and structural perspectives tend to believe that inflation is not harmful to economic growth, other scholars, particularly those in the monetarist tradition, argue that inflation is. Ghana gdp annual growth rate data, historical chart, and calendar of. The main objective of this study was to investigate the impact of inflation on economic growth in six south asian countries. In the 1970s, however, the concept of stagflation gained prominence, and the validity of the positive relationship was questioned. The economic growth of ghana has undergone volatile movements over the past four decades, as shown in table 1. The mediumterm economic programme is based on the ghana poverty reduction strategy gprs, which was adopted in 2002. Exports are set to contract this year on evaporating demand for commodity exports excluding gold, while containment measures to combat covid19 will likely dent both household spending and fixed investment. An econometric assessment of the impact of inflation on. Ahortor1 june 2012 abstract the study investigates the effect of changes in the exchange rate on output growth and inflation in the wamz economies. This page provides ghana inflation rate actual values, historical data, forecast, chart, statistics, economic calendar and news.
Gdp growth rates under different inflation regimes 19702007. Unit root test augmented dickeyfuller test has been exploited to check the integration order of the variables. Understanding economic growth in ghana in comparative perspective. Pdf on feb 3, 2020, nsiah richard and others published the impact of inflation on economic growth in ghana find, read and cite all the. Ghanas economic growth expected to be stronger in 2019. Ordinary least squares ols was used to determine the impact of inflation on economic growth. Jaganath 2014 examined the impact of inflation on economic growth in six south asian countries. The impact of inflation on economic growth in ghana since 1960. This paper therefore proposes a time series approach to study the effects of financial development on economic growth in ghana, using eight alternative proxy indicators for financial development. A general notion in the framework is that an array of government policies. The study used time series data for the period 1980 to 2012.
Evidence from a dynamic panel threshold regression approach arcade ndoricimpaa auniversity of burundi, faculty of economics and management, po box 1280 bujumbura african development bank group. The relationship between interest rates and inflation in. The fishing subsector continued to contract, recording a gdp growth rate of 6. This paper argues that inflation even at a mild level. Abu bakarr tarawalie, momodu sissoho, mohamed conte and christian r.
My empirical implementations of this approach include barro 1991, 1996. Economic growth and development economic growth rate is the rate of change in real income or real output. Pdf this paper analyses the implications of exchange rate, gdp growth and monetary policies for inflation in ghana. Ghana economy gdp, inflation, cpi and interest rate. Their findings showed negative relationship inflation, unemployment and economic growth in nigeria were negative. The question of the effect of inflation on economic growth is one of the issues that have been hotly debated in macroeconomics. The nonoil annual gdp growth rate increased from 4.
This study therefore explores the effect a price of crude oil has on economic growth in ghana. The game of monetary policy, inflation and economic growth. Timeseries data for the period 1990 2011 were used to examine the impact of inflation on economic gro wth. Inflation, foreign direct investment and economic growth. In 2018, the inflation rate in ghana amounted to about 9. Ghana began its automotive industry with the construction of a prototype robust suv, named the smati turtle 1, intended for. Exchange rate, inflation and macroeconomic performance in the wamz prepared by. It was the slowest expansion since the second quarter of 2018, due to a slowdown in both the services and industrial sectors. Crops is the second largest activity in ghana with a share of 14. However, the existence and nature of the inflation economic growth nexus is one of the most significant macroeconomic controversies li, 2006. Economic development and poverty reduction in ghana widening opportunities, new strategic choices 1. Ghana economic growth and development ghana is officially known as the republic of ghana, is one of the most important countries in west africa. Introduction stabilization of a nations economy is the priority of every government. The relationship between trade openness and economic.
Ghana has been confronted with series of economic problems to the extent of calling on the imf for a bailout after every eight years. Section three provides both the theoretical and empirical literature on inflation and economic growth. Economic growth is expected to be stronger in 2019, but over the medium term a more diversified economy is vital, said henry kerali, world bank country director for ghana. Learn more about the ghana economy, including the population of ghana, gdp, facts, trade, business, inflation and other data and analysis on its economy from the index of economic. In spite of the lack of any concrete empirical study establishing the causal interaction between inflation, foreign direct investment and economic growth in ghana, the bank of ghana since 2002 has been pursuing inflation targeting monetary policy at reducing inflation with the ultimate aim of achieving high and sustainable economic growth. Analysis of inflation and its effect on economic growth in. Macroeconomic behaviour and economic growth in ghana econstor. Threshold effects of inflation on economic growth in. Consumers could benefit from lower prices as real income increases, releasing more private resources for savings. This view is presented to justify the imposition of inflation tax by governments.
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