How optimal is Ghana's single-digit inflation targeting? An assessment of monetary policy effectiveness in Ghana

Richard Amoatey, Richard K. Ayisi, Eric Osei-Assibey
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Abstract

Purpose

The purpose of this study is twofold. First, to estimate an optimal inflation rate for Ghana and second, to investigate factors that account for the differences between observed and target inflation.

Design/methodology/approach

The paper explored the questions within two econometric frameworks, the Autoregressive Distributed Lag (ARDL) and Threshold Regression Models using data spanning the period 1965–2019.

Findings

The study estimated a range of 5–7% optimal inflation for Ghana. While this confirms the single-digit inflation targeting by the Bank of Ghana, the range is lower than the central bank's band of 6–10%. The combined behaviours of the central bank, banks and external outlook influence inflation target misses.

Practical implications

The study urges the central bank to continue pursuing its single-digit inflation targeting. However, it implies that there is still room for the Bank to further lower the current inflation band to achieve an optimal outcome on growth and welfare. Again, the Bank should commit to increased transparency and accountability to enhance its credibility in attaining the targeted inflation.

Originality/value

The study is one of the first attempts in Africa in Ghana to estimate an optimal inflation target and investigate the underlying factors for deviation from the targets.

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加纳的个位数通胀目标有多理想?加纳货币政策有效性评估
本研究的目的是双重的。首先,估计加纳的最佳通货膨胀率,其次,调查导致观察到的通货膨胀率和目标通货膨胀率之间差异的因素。本文利用1965年至2019年期间的数据,在两个计量经济学框架(自回归分布滞后(ARDL)和阈值回归模型)中探讨了这些问题。研究结果估计,加纳的最佳通货膨胀率为5-7%。虽然这证实了加纳银行的个位数通胀目标,但这一范围低于央行6-10%的区间。央行、银行和外部前景的综合行为影响通胀目标的缺失。实际意义该研究敦促央行继续追求个位数的通胀目标。然而,这意味着英国央行仍有进一步降低当前通胀区间的空间,以实现经济增长和福利的最佳结果。再次,央行应致力于提高透明度和问责制,以提高其在实现目标通胀方面的可信度。原创性/价值本研究是非洲首次尝试在加纳估计最佳通胀目标,并调查偏离目标的潜在因素之一。
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来源期刊
CiteScore
3.20
自引率
7.70%
发文量
41
期刊介绍: African Journal of Economic and Management Studies (AJEMS) advances both theoretical and empirical research, informs policies and practices, and improves understanding of how economic and business decisions shape the lives of Africans. AJEMS is a multidisciplinary journal and welcomes papers from all the major disciplines in economics, business and management studies.
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