Threshold effects of inflation on economic growth in africa. Monetary policy in ghana has, over the years, focused on ensuring price stability or low inflation. 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. Theoretical framework the model specification to investigate the relationship between economic growth, trade openness. This move in monetary policymaking is firmly rooted in the belief, shared by. The effect of inflation on economic growth in tanzania. 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. This page provides ghana inflation rate actual values, historical data, forecast, chart, statistics, economic calendar and news. 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. The economic growth of ghana has undergone volatile movements over the past four decades, as shown in table 1. An econometric assessment of the impact of inflation on. Unit root test augmented dickeyfuller test has been exploited to check the integration order of the variables. It was the slowest expansion since the second quarter of 2018, due to a slowdown in both the services and industrial sectors. Ghana began its automotive industry with the construction of a prototype robust suv, named the smati turtle 1, intended for.
An analytical study of the impact of inflation on economic. There is a common belief that inflation at a mild level is necessary for economic growth in developing countries. Timeseries data for the period 1990 2011 were used to examine the impact of inflation on economic gro wth. The relationship between trade openness and economic. 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. Apart from ghana, south africa and nigeria currently pursuing an inflation targeting regime, most of the rest of african countries pursue a monetary targeting. Introduction stabilization of a nations economy is the priority of every government. Ghana economy gdp, inflation, cpi and interest rate. This study sought to determine the impact of inflation on economic growth in zimbabwe.
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. Ghana has been confronted with series of economic problems to the extent of calling on the imf for a bailout after every eight years. Impact of macroeconomic factors on economic growth in. The effect of price stability on real sector performance in ghana. This situation has persisted in spite of various monetary authority stabilization policies.
Section four addresses issues on the analytical framework and methodology, while section five presents the analysis of the empirical results, conclusion. The effect of foreign aid on economic growth in developing. Financial development and economic growth in ghana. Economic development and poverty reduction in ghana widening opportunities, new strategic choices 1. Section 5 presents and discusses the empirical results, and section 6 gives concluding remarks. Analysis of inflation and its effect on economic growth in. The study used time series data for the period 1980 to 2012. Crops is the second largest activity in ghana with a share of 14. Therefore, the primary cause of poor macroeconomic performance such as per capita gross domestic product gdp and inflation rate in ghanaian economy of the. The determinants of economic growth in ghana munich personal. Apart from ghana, south africa and nigeria currently pursuing an inflationtargeting regime, most of the rest of african countries pursue a monetary targeting. Are inflation, exchange rate, stock prices, money supply, and monetary policy rate determinants of economic growth in ghana. Economic growth is a sustained increase in a countrys national income or. 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.
Dickson akoto, the relationship between interest rates and inflation in ghana and. 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 question of the effect of inflation on economic growth is one of the issues that have been hotly debated in macroeconomics. This view is presented to justify the imposition of inflation tax by governments. Pdf the impact of inflation on economic growth in ghana. 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.
Economic growth in ghana over the period 1975 to 2015. The impact of inflation on economic growth in ghana since 1960. Ghana gdp annual growth rate data, historical chart, and calendar of. Consumers could benefit from lower prices as real income increases, releasing more private resources for savings. Ghana is located near the golf of guinee and the atlantic ocean, and it is spread on a surface of 238,535 km. Monetary policy, inflation, economic growth, ardl, ghana 1.
Understanding economic growth in ghana in comparative perspective. Some stationarity and cointegration tests were carried out. Ghana economic growth rate more than doubles in 2017 to 8. Inflation, foreign direct investment and economic growth. In the 1970s, however, the concept of stagflation gained prominence, and the validity of the positive relationship was questioned. 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. This paper argues that inflation even at a mild level. Section three provides both the theoretical and empirical literature on inflation and economic growth.
Motivated by this controversial, this study examined the impact of inflation on economic gro wth and established the existence of inflation growth relationship. This study therefore explores the effect a price of crude oil has on economic growth in ghana. The time series yearly data for inflation and economic growth gdp from 1990 to 2017 were used for the study. However, the existence and nature of the inflation economic growth nexus is one of the most significant macroeconomic controversies li, 2006. In any case, the soundness of every economy revolves around its economic and financial performance. Based on the performed growth regressions, we predict ghana s future growth potential for di erent scenarios. Threshold effects of inflation on economic growth in africa african. 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. The mediumterm economic programme is based on the ghana poverty reduction strategy gprs, which was adopted in 2002. Apart from physical capital, human capital, inflation and debt servicing, the.
The fishing subsector continued to contract, recording a gdp growth rate of 6. 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. Ordinary least squares ols was used to determine the impact of inflation on economic growth. Threshold effects of inflation on economic growth in. The bone of contention is whether inflation is indispensable for growth. Country fact sheet on food and agriculture policy trends pdf. The game of monetary policy, inflation and economic growth. Ghana economic growth the growth outlook for 2020 was slashed again in april. Jaganath 2014 examined the impact of inflation on economic growth in six south asian countries. My empirical implementations of this approach include barro 1991, 1996.
Nonoil growth is expected to accelerate to 6% as the governments new policies in the agriculture sector. Inflation, growth, monetary policy, threshold effect, 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. 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. A regional analysis of inflation dynamics in ghana international.
However, whenever there is expected inflation, governments around the world take appropriate steps to minimize the ill effects of inflation to a certain extent. For example, the oil prices and gdp generally increased within the period under study in a fluctuating manner see figure 1a and 1b. Ghana s economy expanded at the fastest rate in five years in 2017 as oil and gas production surged. The main objective of this study was to investigate the impact of inflation on economic growth in six south asian countries. Consumers could benefit from lower prices as real income increases.
Pdf this paper analyses the implications of exchange rate, gdp growth and monetary policies for inflation in ghana. The aggregate supplyaggregate demand asad framework also postulated a positive relationship between inflation and growth where, as growth increased, so did inflation. The economy of ghana has a diverse and rich resource base, including the manufacturing and. Economic growth and development economic growth rate is the rate of change in real income or real output. Abu bakarr tarawalie, momodu sissoho, mohamed conte and christian r.
Macroeconomic behaviour and economic growth in ghana econstor. They found out that labour, capital investment and trade are important in explaining ghana s economic growth in the. Stylized facts about inflation and economic growth in africa table 1 and appendix 6 present inflation and growth experiences in africa. A general notion in the framework is that an array of government policies. Their findings showed negative relationship inflation, unemployment and economic growth in nigeria were negative.
The nonoil annual gdp growth rate increased from 4. This paper therefore focuses on investigating the games of monetary policy, inflation and economic growth of the ghanaian economy for the period of. Inflation is a problem because, ceteris paribus, it lowers real incomes, discourages savings, makes. The relationship between interest rates and inflation 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.
Using ols, adf and granger causality, aminu and anono 2012 also studied the effect of inflation on economic growth and development in nigeria. Key opportunities and policy options to transform agriculture for economic growth, job creation and. Ghanas economic growth expected to be stronger in 2019. 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. Ahortor1 june 2012 abstract the study investigates the effect of changes in the exchange rate on output growth and inflation in the wamz economies. Gdp growth rates under different inflation regimes 19702007.
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