Monetary Policy and Price Stability in Ghana’s Fourth Republic: Have the Dues Been Paid?

The fact that price stability is at the core of monetary policy frameworks of central banks in Africa is well known. However, whether this price stability objective has been served and how other macroeconomic and welfare conditions have fared as a consequence remains an important consideration that has not been given careful thought in the literature. Using Ghana, an inflation- targeting country, as a case study, we assess the price stability performance and other macroeconomic developments and imperatives to address whether the intended objectives and actual outcomes are in sync, with hard and soft nose as a framework. We find that inflation has been low and stable under the inflation targeting regime. However, the constant breaches of the publicly announced inflation targets do dent the credibility of the monetary authorities and shake the very foundation of the inflation-targeting framework. Still, it also raises serious questions about the quality of the forecasting framework of the Central Bank and the nature of assessments that feed into the target determination. Important policy issues are discussed.