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Effect of Monetary Policy on Economic Growth in Ghana

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  • Abille, Adamu Braimah
  • Mpuure, Desmond Mbe-Nyire

Abstract

This paper seeks to examine the role of monetary policy as an instrument for growth in the Ghanaian economy. The study was conducted based on yearly data from 1983 to 2017. Economic growth was the regressand in the study, with money supply, inflation, and the lending rate as the regressors. The ARDL bounds test technique was employed to investigate cointegration among the variables. The results confirmed the presence of cointegration among the variables. The results also showed the money supply as having a significant positive effect on growth in Ghana in the long run but a significant negative effect on growth in the short run. The lending rate however, was found to have an insignificant negative effect on growth in the long run but a significant positive effect on growth in the short run. Therefore, on the basis of the research findings, it is recommended that money supply be regulated in such a way that it does not lead to uncontrollable inflation, as inflation has a significant negative impact on economic growth at least in the short run, while persistent inflation in the long run is inimical to economic growth. It is further recommended that the lending rate be managed properly in order for investment to be accelerated to boost economic growth.

Suggested Citation

  • Abille, Adamu Braimah & Mpuure, Desmond Mbe-Nyire, 2020. "Effect of Monetary Policy on Economic Growth in Ghana," Asian Journal of Applied Economics, Kasetsart University, Center for Applied Economics Research, vol. 27(2).
    • Handle: RePEc:ags:thkase:334400
    DOI: 10.22004/ag.econ.334400
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    References listed on IDEAS

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