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Does Money Matter for Inflation in Ghana?

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  • Arto Kovanen
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    Abstract

    Money has only limited information value for future inflation in Ghana over a typical monetary policy implementation horizon (four to eight quarters). On the other hand, currency depreciation and demand pressures (as measured by the output gap) are shown to be important predictors of future price changes. Inflation inertia is high and inflation expectations are largely based on backward-looking information, suggesting that inflation expectations are not well anchored and hence more is needed to strengthen the credibility of Ghana's inflation-targeting regime.1

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/274.

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    Length: 23
    Date of creation: 01 Nov 2011
    Date of revision:
    Handle: RePEc:imf:imfwpa:11/274

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    Related research

    Keywords: Economic models; Emerging markets; Inflation targeting; Interest rates;

    This paper has been announced in the following NEP Reports:

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    1. Emil Stavrev & Helge Berger, 2008. "The Information Content of Money in Forecasting Euro Area Inflation," IMF Working Papers 08/166, International Monetary Fund.
    2. Issing, Otmar, 2011. "Lessons for monetary policy: What should the consensus be?," CFS Working Paper Series 2011/13, Center for Financial Studies (CFS).
    3. Charles Freedman & Douglas Laxton, 2009. "Why Inflation Targeting?," IMF Working Papers 09/86, International Monetary Fund.
    4. Ghartey, Edward E., 1998. "Monetary dynamics in Ghana: evidence from cointegration, error correction modelling, and exogeneity," Journal of Development Economics, Elsevier, vol. 57(2), pages 473-486.
    5. Lance J. Bachmeier & Norman R. Swanson, 2005. "Predicting Inflation: Does The Quantity Theory Help?," Economic Inquiry, Western Economic Association International, vol. 43(3), pages 570-585, July.
    6. Pradhan, Basanta K. & Subramanian, A., 2003. "On the stability of demand for money in a developing economy: Some empirical issues," Journal of Development Economics, Elsevier, vol. 72(1), pages 335-351, October.
    7. Galina Hale & Òscar Jordà, 2007. "Do monetary aggregates help forecast inflation?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue apr13.
    8. Alvaro Angeriz & Philip Arestis, 2007. "Assessing the Performance of 'Inflation Targeting Lite' Countries," The World Economy, Wiley Blackwell, vol. 30(11), pages 1621-1645, November.
    9. Markus Knell & Helmut Stix, 2006. "Three decades of money demand studies: differences and similarities," Applied Economics, Taylor & Francis Journals, vol. 38(7), pages 805-818.
    10. Michael Scharnagl & Christina Gerberding & Franz Seitz, 2010. "Should Monetary Policy Respond to Money Growth? New Results for the Euro Area," International Finance, Wiley Blackwell, vol. 13(3), pages 409-441, Winter.
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