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Monetary Policy and Financial Sector Reform For Employment Creation and Poverty Reduction in Ghana

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  • James Heintz
  • Gerald Epstein
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    Abstract

    This report summarizes the findings of a UNDP-sponsored study on the structure of the financial sector, central bank policy, and employment outcomes in Ghana. The financial sector is the primary conduit through which monetary policy affects real economic outcomes, and monetary policy determines the resources available to financial institutions. Therefore, monetary policy must be coordinated with financial sector reforms in order to improve employment opportunities, reduce poverty and support human development. The report develops a critique of financial programming and inflation targeting, presents a series of empirical estimates on the impact of monetary policy variables in Ghana, and describes the elements of an alternative monetary policy. In addition, the report documents the institutional and structural constraints currently operating in the financial system which prevent the sector from facilitating investment, growth, and improved employment opportunities. Econometric estimates of the determinants of investment explicitly link financial variables to real economic activity. The report summarizes a series of financial sector reforms that would improve the financial sector's capacity to move Ghana onto an employment-intensive growth path.

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    Bibliographic Info

    Paper provided by Political Economy Research Institute, University of Massachusetts at Amherst in its series Working Papers with number wp113.

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    Date of creation: 2006
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    Handle: RePEc:uma:periwp:wp113

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    1. Ocampo, Jose Antonio, 2002. "Capital-Account and Counter-Cyclical Prudential Regulations in Developing Countries," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
    2. Laurence Ball, 1993. "What Determines the Sacrifice Ratio?," NBER Working Papers 4306, National Bureau of Economic Research, Inc.
    3. Harrison, Ann, 1991. "Openness and growth : a time series, cross-country analysis for developing countries," Policy Research Working Paper Series 809, The World Bank.
    4. Easterly, William, 2006. "An identity crisis? Examining IMF financial programming," World Development, Elsevier, vol. 34(6), pages 964-980, June.
    5. Frederic S. Mishkin & Adam S. Posen, 1998. "Inflation Targeting: Lessons from Four Countries," NBER Working Papers 6126, National Bureau of Economic Research, Inc.
    6. Mario I. Blejer & Alfredo M. Leone & Pau Rabanal & Gerd Schwartz, 2001. "Inflation Targeting in the Context of IMF-Supported Adjustment Programs," Working Papers Central Bank of Chile 116, Central Bank of Chile.
    7. K.S. Jomo & Ilene Grabel & Gerald Epstein, 2003. "Capital Management Techniques In Developing Countries: An Assessment of Experiences From the 1990s and Lessons for the Future," Working Papers wp56, Political Economy Research Institute, University of Massachusetts at Amherst.
    8. Corrinne Ho & Robert N. McCauley, 2003. "Living with flexible exchange rates: issues and recent experience in inflation targeting emerging market economies," BIS Working Papers 130, Bank for International Settlements.
    9. Chirinko, Robert S, 1993. "Business Fixed Investment Spending: Modeling Strategies, Empirical Results, and Policy Implications," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1875-1911, December.
    10. Aryeetey, Ernest & Udry, Christopher, 1997. "The Characteristics of Informal Financial Markets in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(1), pages 161-203, March.
    11. Ernest Aryeetey, 2003. "Recent Developments in African Financial Markets: Agenda for Further Research," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 12(Supplemen), pages 111-152, September.
    12. Fergus Lyon, 2003. "Trader associations and urban food systems in Ghana: institutionalist approaches to understanding urban collective action," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 27(1), pages 11-23, 03.
    13. Andong Zhu & Robert Pollin, 2005. "Inflation and Economic Growth: A Cross-Country Non-linear Analysis," Working Papers wp109, Political Economy Research Institute, University of Massachusetts at Amherst.
    14. Gerald Epstein, 2003. "Alternatives to Inflation Targeting Monetary Policy for Stable and Egalitarian Growth: A Brief Research Summary," Working Papers wp62, Political Economy Research Institute, University of Massachusetts at Amherst.
    15. James Heintz, 2005. "Employment, Poverty, and Gender in Ghana," Working Papers wp92, Political Economy Research Institute, University of Massachusetts at Amherst.
    16. corrinne ho & robert n mccauley, 2004. "Living with flexible exchange rates:," International Finance 0411003, EconWPA.
    17. Nii K. Sowa & Ivy K. Acquaye, 1999. "Financial and foreign exchange markets liberalization in Ghana," Journal of International Development, John Wiley & Sons, Ltd., vol. 11(3), pages 385-409.
    18. Johan Mathisen & Thierry D. Buchs, 2005. "Competition and Efficiency in Banking," IMF Working Papers 05/17, International Monetary Fund.
    19. Ndikumana, Leonce, 2000. "Financial Determinants of Domestic Investment in Sub-Saharan Africa: Evidence from Panel Data," World Development, Elsevier, vol. 28(2), pages 381-400, February.
    20. International Monetary Fund, 2004. "Ghana," IMF Staff Country Reports 04/207, International Monetary Fund.
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    Cited by:
    1. van Waeyenberge, Elisa & Bargawi, Hannah, 2011. "Macroeconomic policy for "full and productive employment and decent work for all" : Uganda country study," ILO Working Papers 465873, International Labour Organization.
    2. Gerald Epstein, 2009. "Rethinking Monetary and Financial Policy: Practical suggestions for monitoring financial stability while generating employment and poverty reduction," Published Studies ilo_epstein11_09, Political Economy Research Institute, University of Massachusetts at Amherst.
    3. James Heintz & Robert Pollin, 2008. "Targeting Employment Expansion, Economic Growth and Development in Sub-Saharan Africa: Outlines of an Alternative Economic Programme for the Region," Published Studies targeting_employment_expa, Political Economy Research Institute, University of Massachusetts at Amherst.
    4. Gerald Epstein & Ilene Grabel, 2007. "Financial Policy," Publications 3, International Policy Centre for Inclusive Growth.

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