International Journal of Finance and Banking Research

Submit a Manuscript

Publishing with us to make your research visible to the widest possible audience.

Propose a Special Issue

Building a community of authors and readers to discuss the latest research and develop new ideas.

The Effect of Monetary Policy on Inflation in Ghana

Ghana is working to reduce the inflation rate, which has become a burden. This study especially focuses on the short- and long-term effects of monetary policy on inflation in order to determine how it affects inflation in Ghana. The scope of the study was expanded to look at how responsive inflation is to monetary policy shocks and the relationship between monetary policy and Ghana's inflation rate. The vector error correction model was utilized as an estimation technique in the study, which utilised secondary data spanning the years 1990 to 2018. The study found that monetary policy, economic growth, and oil prices have a favorable short-term impact on inflation. The findings also showed that while currency rates and oil prices have a negative impact on inflation, monetary policy has a beneficial impact. The study also found a one-way causal relationship between inflation and monetary policy, exchange rate, economic expansion, and oil prices. The empirical results lead to the conclusion that inflationary innovations have a beneficial impact on monetary policy and the currency rate, but a negative one on oil prices. As a monetary policy tool to stop the inflationary trend, the report advises stakeholders and policymakers to reduce the quantity of money.

Monetary Policy, Inflation Rate, Vector Error Correction Model, Causality, Impulse Response Function

Emmanuel Kwakye Amoah, Foster Awindolla Asaki, Dominic Atogumsekiya Anarigide, Michael Osei. (2023). The Effect of Monetary Policy on Inflation in Ghana. International Journal of Finance and Banking Research, 9(5), 79-89.

Copyright © 2023 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License ( which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

1. Aimola, A. U., & Odhiambo, N. M. (2021). Public debt and inflation: empirical evidence from Ghana. Development Studies Research, 8 (1), 1-13.
2. Friedman, M. (1982). Monetary policy: Theory and practice. Journal of Money, Credit and Banking, 14 (1), 98-118.
3. Mishkin, F. S. (1997). Strategies for controlling inflation. Reserve Bank of Australia, 1997.
4. Svensson, L. E. O. (1999). Price-Level Targeting Versus Inflation Targeting: A Free Lunch? Journal of Money, Credit and Banking, 31 (3), Part 1, 277-295.
5. Christiano, L. J., & Fitzgerald, T. J. (2003). Inflation and monetary policy in The Twentieth Century. Available at SSRN 378322.
6. Akram, M., Hassan, S. S., Farhan, M., & Alam, H. M. (2011). Empirical analysis of determinants of economic growth: Evidence from SAARC countries. Journal of Economics and Behavioral Studies, 3 (2), 115-121. Banking, 14 (1), 98-118.
7. Sean, M., Pastpipatkul, P., & Boonyakunakorn, P. (2019). Money supply, inflation and exchange rate movement: the case of Cambodia by Bayesian VAR approach. Journal of Management, Economics, and Industrial Organization, 3 (1), 63-81.
8. Idolor, E. J., & Raphael, O. (2022). Effect of Inflation Rate and Investment on Economic Growth in Nigeria. African Development Finance Journal, 4 (1), 49-72.
9. Rossi, S. (2022). Milton Friedman and the monetarist school. In A Brief History of Economic Thought (pp. 193-210). Edward Elgar Publishing.
10. Bordo, M. D., & Levy, M. D. (2021). Do enlarged fiscal deficits cause inflation? The historical record. Economic Affairs, 41 (1), 59-83.
11. Amadeo, K. (2012). Obamacare Bill: A Summary of the Bill’s 10 Titles. About. com. Retrieved from:
12. Ali, M., & Ibrahim, P. (2018). Inflation and companies’ performance: a cross-sectional analysis. Advanced Science Letters, 24 (6), 4750-4755.
13. Amaefula, C. G. (2016). The long-Run relationship between interest rate and inflation: Evidence from Nigeria. Journal of Economics and Finance, 7 (3), 24-28.
14. Congressional Budget Office (2021). Inflation and its effects. Retrieved from
15. Bank of Ghana (2022). Bank of Ghana’s Forecasting and Policy Analysis System. BoG Occasional Papers No. 1/2022.
16. Chugunov, I., Pasichnyi, M., Koroviy, V., Kaneva, T., & Nikitishin, A. (2021). Fiscal and monetary policy of economic development. European Journal of Sustainable Development, 10 (1), 42-42.
17. World Bank, World Development Indicators 2019. https://data.
18. Ahiabor, G. (2013). The effects of monetary policy on inflation in Ghana. Developing Country Studies, 3 (12), 82-89.
19. Adu, G., & Marbuah, G. (2011). Determinants of inflation in Ghana: An Empirical Investigation. South African Journal of Economics, 79 (3), 251-269.
20. Gyebi, F., & Boafo, G. K. (2013). Macroeconomic determinants of inflation in Ghana from 1990-2009. International Journal of Business and Social Research (IJBSR), 3 (6), 81-93.
21. Quartey, P. (2010). Price stability and the growth maximizing rate of inflation for Ghana. Modern Economy, 1 (03), 180.
22. Quartey, P., & Afful-Mensah, G. (2014). Financial and monetary policies in Ghana: A review of recent trends. Review of Development Finance, 4 (2), 115-125.
23. Precious, W. A. (2020). The effect of monetary policy and inflation on the exchange rate: A case study of Ghana. Journal of Economics and International Finance, 12 (4), 151-163.
24. Bleaney, M., Morozumi, A., & Mumuni, Z. (2020). Inflation targeting and monetary policy in Ghana. Journal of African Economies, 29 (2), 121-145.
25. Angelina, S., & Nugraha, N. M. (2020). Effects of Monetary Policy on Inflation and National Economy Based on Analysis of Bank Indonesia, Annual Report. Technium Soc. Sci. J., 10, 423.
26. Kovanen, A. (2011). Does money matter for inflation in Ghana?
27. Akinbobola, T. O. (2012). The Dynamics of money supply, exchange rates and inflation in Nigeria. Journal of Applied Finance & Banking, vol. 2, no. 4, 2012, 117-141.
28. Duodu, E., Baidoo, S. T., Yusif, H., & Frimpong, P. B. (2022). Money supply, budget deficit and inflation dynamics in Ghana: An empirical investigation. Cogent Business & Management, 9 (1), 2043810.
29. Orphanides, A. (2001). Monetary policy rules based on real time data. American Economic Review, 91, 964-985.
30. Abradu-Otoo, P. (2003). Monetary Growth, Exchange Rates and Inflation in Ghana: An Error Correction Analysis.
31. Sowah, N., & Kwakye, J. (1993). Inflationary trends and control in Ghana. Africa Economic Research consortium (AERC), 22.
32. Zhang, C. (2013). Money, housing, and inflation in China. Journal of Policy Modeling, 35 (1), 75-87.
33. Batini, N., & Nelson, E. (2001). The lag from monetary policy actions to inflation: Friedman revisited. International Finance, 4 (3), 381-400.
34. Williams, O. H., & Adedeji, O. (2004). Inflation dynamics in the Dominican Republic. IMF working Paper, WP/04/29.
35. Su, C. W., Fan, J. J., Chang, H. L., & Li, X. L. (2016). Is there causal relationship between money supply growth and inflation in China? Evidence from quantity theory of money. Review of Development Economics, 20 (3), 702-719.
36. Engle, R. F. & Granger, C. W. (1987). “Cointegration and error correction: Representation, estimation and testing.” Econometrica, 55 (2): 251-276.
37. Feasel, E., Kim, Y., & Smith, S. C. (2001). Investment, exports, and output in South Korea: A VAR approach to growth empirics. Review of Development Economics, 5 (3), 421-432.
38. Asumadu-Sarkodie, S., & Owusu, P. A. (2016). The relationship between carbon dioxide and agriculture in Ghana: a comparison of VECM and ARDL model. Environmental Science and Pollution Research, 23 (11), 10968-10982.
39. Oteng-Abayie, E. F., Asaki, F. A., Eshun, M. E., & Abokyi, E. (2022). Decomposition of the decoupling of CO2 emissions from economic growth in Ghana. Future Business Journal, 8 (1), 25.
40. Pettinger, T. (2017). Conflict between economic growth and inflation, economics.
41. Bala, U., & Chin, L. (2018). Asymmetric impacts of oil price on inflation: An empirical study of African OPEC member countries. Energies, 11 (11), 3017.
42. Edelstein, P., & Kilian, L. (2009). How sensitive are consumer expenditures to retail energy prices? Journal of Monetary Economics, 56 (6), 766-779.
43. Agénor, P. R., & Montiel, P. J. (2015). Development macroeconomics. In Development Macroeconomics. Princeton university press.
44. Friedman, M., & Schwartz, A. J. (2008). A monetary history of the United States, 1867-1960 (Vol. 16). Princeton University Press.
45. Sultana, N., Koli, R., & Firoj, M. (2019). Causal relationship of money supply and inflation: A study of Bangladesh. Asian Economic and Financial Review, 9 (1), 42-51.