Justifying the Adoption and Relevance of Inflation Targeting Framework: A Time-Varying Evidence from Ghana
This paper scrutinizes the rationale for the adoption of inflation targeting (IT) by Bank of Ghana in 2002. In this case, we determine the stability or otherwise of the relationship between money supply and inflation in Ghana over the period 1970M1-2016M3 using battery of econometric methods. The empirical results show an unstable link between inflation and monetary growth in Ghana, while the final state coefficient of inflation elasticity to money growth is positive but statistically insignificant. We find that inflation elasticity to monetary growth has continued to decline since the 1970s, showing a waning impact of money growth on inflation in Ghana. Notably, there is also evidence of negative inflation elasticity to monetary growth between 2001 and 2004, lending support to the adoption of IT framework in Ghana in 2002. We emphasized that the unprecedented 31-months of single-digit inflation (June 2010-December 2012), despite the observed inflationary shocks in 2010 and 2012, reinforces the immense contribution of the IT framework in anchoring inflation expectations, with better inflation outcomes and inflation variability in Ghana. The paper therefore recommends the continuous pursuance and strengthening of the IT framework in Ghana, as it embodies a more eclectic approach to policy formulation and implementation.
Code (0)
등록된 구현이 없습니다.
Similar Papers 제목 키워드 기반
Monetary-fiscal interactions under price level targeting
The adoption of a "makeup" strategy is one of the proposals in the ongoing review of the Fed's monetary policy framework. Another suggestion, to avoid the zero lower bound, is a more active role for fiscal policy. We put…
A short term credibility index for central banks under inflation targeting: an application to Brazil
This paper uses predictive densities obtained via mixed causal-noncausal autoregressive models to evaluate the statistical sustainability of Brazilian inflation targeting system with the tolerance bounds. The probabiliti…
Inflation targeting strategy and its credibility
The money supply is endogenous if the monetary policy strategy is the so called Inflation and Interest Rate Targeting, IRT. With that and perfect credibility, the theory of the price level and inflation only needs the Fi…
Macroeconomic Effects of Inflation Targeting: A Survey of the Empirical Literature
This paper surveys the empirical literature of inflation targeting. The main findings from our review are the following: there is robust empirical evidence that larger and more developed countries are more likely to adop…
Kalman Filter in the Problem of the Exchange and the Inflation Rates Adequacy To Determining Factors
Using introduced concept of the exchange and inflation rates adequacy, the relevance of them to the determining factors is found. We established close positive relation between hryvnia / dollar exchange and inflation rat…
Relation