The Effects of Monetary Policy on Inflation in Ghana

Abstract

This study looks at the effects of monetary policy on inflation in Ghana. Annual data from 1985-2009 were used to estimate the model. The study limited itself to these variables, interest rate, exchange rate and money supply on inflation. In Ghana the bank of Ghana is responsible for controlling money supply. The results showed a long-run positive relationship between money supply and inflation, negative relationship between interest rate and inflation however a positive relationship between exchange rate and inflation. The study recommends that monetary policy alone should not be used to control inflation but fiscal and other non monetary measures must be employed.

Key words: Monetary Policy, Inflation, Money supply Interest rate, Exchange rate