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Devaluation and Inflation with Parallel Markets: An Application to Ghana

Author

Listed:
  • Ajay Chhibber

    (The World Bank)

  • Nemat Shafik

    (The World Bank)

Abstract

A common concern in reform programs is the potential inflationary effects of the combination of devaluation, trade liberalization, subsidy reduction, and price decontrol This issue is critical in Africa, where inflation has accelerated in several countries, particularly those undergoing adjustments. In Ghana, which has carried out one of the most thorough structural adjustment programs in Africa, an increasingly high inflation rate has been attributed to major devaluations of the official exchange rate. This paper disputes this conclusion based on careful testing and simulations using a macroeconomic model estimated with Ghanaian data.

Suggested Citation

  • Ajay Chhibber & Nemat Shafik, 1992. "Devaluation and Inflation with Parallel Markets: An Application to Ghana," Journal of African Development, African Finance and Economic Association, vol. 1(1), pages 108-134.
  • Handle: RePEc:afe:journl:v:1:y:1992:i:2:p:108-134
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