Five Years Of Inflation-Targeting In Ghana: What Has Changed And What Needs To Change Further To Enhance The Process?

"After achieving political independence in 1957, Ghana set up its own central bank to conduct independent monetary policy among other functions. Since then, various frameworks have been adopted to deliver price stability as the principal goal of monetary policy. Evidence shows that Ghana has had higher rates of inflation compared to most of its African peers during its history. This unenviable record can be attributed to both the causes and management of inflation. The causes have received considerable attention in the literature. High domestic demand fuelled by expansionary fiscal policies and accommodating monetary policies and the high proclivity of the economy to supply shocks particularly with respect to food, which commands a large weight in the consumption basket have been identified as the principal causes of the high rates of inflation. The effectiveness of monetary management, has, however, not been sufficiently investigated. The effectiveness of monetary policy depends to a large extent on the framework chosen to conduct it. A critical analysis of the monetary policy frameworks used in Ghana has been undertaken from which important lessons for the future have been drawn."