Inflation, public debt and unemployment nexus in Ghana. An ARDL analysis

In recent years Ghana is challenged with rising debt, surging inflation, and unfavorable unemployment rates. To mitigate their impact on economic prosperity the country requires strategic policy interventions. Using data from 1990 to 2022, this study attempts to analyze the relationship between inflation, public debt, and unemployment in Ghana. The ARDL framework was used to estimate the variables. A long-run relationship between public debt and inflation was established. Notably, inflation correlates negatively with public debt in both short and long -run. Whiles public debt demonstrated a positive correlation with unemployment in both short and long-run, remittances displayed a negative long-run correlation with unemployment. The study suggests that prioritizing domestic debts over foreign debts could be strategic to hedge against inflationary risk. Moreover, we recommend a targeted investment in infrastructure projects and the promotion of agriculture. These initiatives will spur economic growth, engender sustainable development and ultimately create more job opportunities.This study examines the relationship between inflation, public debt, and unemployment in Ghana and provides insightful information that is important for academic discourse as well as policy formulation. Using the Autoregressive Distributed Lag (ARDL) framework and data from 1990 to 2022, the study uncovers significant findings. First of all, it proves that there is a long run negative correlation between public debt and inflation, emphasizing the need for prudent debt management measures. Notably, the preference for local debt over borrowing from external sources appears to be a possible hedge against inflationary risks. Secondly, the analysis reveals a positive long run relationship between unemployment and public debt, highlighting the significance of sustainable economic growth measures to counteract this relationship. To achieve this, it is suggested that targeted investments in infrastructure is required in key sectors like agriculture and manufacturing to stimulate economic growth and create employment opportunities.Furthermore, the study emphasizes how crucial it is to improve the trade balance by promoting exports. The effective use of trade can reduce the burden of public debt and promote prosperity. The Ghanaian government is encouraged by these findings to prioritize domestic borrowing and take into account fixed interest rate loans, or loans denominated in local currency in managing the public debt. In the realm of academic literature, the study enriches the discourse regarding the macroeconomic dynamics of developing economies, with a focus on Sub-Saharan Africa. The research provides empirical evidence to support the current debate on debt management, inflation control employment generation. The study significantly lays the foundation for future studies and the development of public policies that promote economic stability and prosperity.