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Impact of Inflation on Economic Growth on the Ghanaian Economy in Entrepreneurial Perspective

Author

Listed:
  • Edward Domina Attafuah

    (Accountant, University Health Service, University for Development Studies)

  • Seth Amoako

    (Lecturer, AAMUSTED P.O. Box 1277 kumasi)

  • Francis Amponsah

    (Statistics Research and Monitoring Unit (SRMU) CID Headquarters P O BOX 505, Accra)

Abstract

This research investigates the impact of inflation on economic growth within the Ghanaian economy, a subject of ongoing debate among economists and policymakers. Eradication of purchasing power together with misdirected investment decisions has been noted by both Fischer and Mishkin as complex issues when examining macroeconomic goals for developing nations along with price stability and GDP growth promotion. A small amount of inflation may boost economic production and demand according to the authors but excessive inflation creates investment barriers and limits long-term development. The annual consumer inflation in Ghana rose to 23.8% during December 2024 based on data from Trading Economics which sparked economic worry. World Bank statistics indicate that this research seeks to guide policymakers through their development of monetary tools and fiscal instruments which sustain price stability and enduring economic expansion within Ghana. Studies about how inflation affects GDP expansion in Ghana show contradictory information. general inflation rates seem to foster GDP growth by motivating producers to boost production for increasing profits. Research findings show that high inflation generates negative effects on GDP expansion. The research studies show discovered co-integration between economic growth and macroeconomic factors alongside inflation in Ghana. The study discovered that inflation reduces Ghana’s economic growth since it requires powerful monetary policy intervention to address this issue. The discrepant research findings show that additional studies are needed to understand the particular effects that inflation has on Ghana’s economic expansion. The research used time series data spanning 2000–2018 while applying vector autoregressive (VAR) models for its analysis. Statistical analysis of the study showed that general inflation and low inflation levels foster GDP expansion yet high inflation rates together with government expenditure act as growth inhibitors (WJARR, 2021). The complex findings demand careful policy decisions which take into account both Ghana’s inflation situation and economic framework.

Suggested Citation

  • Edward Domina Attafuah & Seth Amoako & Francis Amponsah, 2025. "Impact of Inflation on Economic Growth on the Ghanaian Economy in Entrepreneurial Perspective," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 9(4), pages 975-985, April.
    • Handle: RePEc:bcp:journl:v:9:y:2025:issue-4:p:975-985
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    References listed on IDEAS

    as
    1. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
    2. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    3. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    4. Bruno, Michael & Easterly, William, 1998. "Inflation crises and long-run growth," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 3-26, February.
    5. Fischer, Stanley, 1993. "The role of macroeconomic factors in growth," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 485-512, December.
    6. Thomas J. Sargent, 1982. "The Ends of Four Big Inflations," NBER Chapters, in: Inflation: Causes and Effects, pages 41-98, National Bureau of Economic Research, Inc.
    7. Robert J. Barro, 1998. "Determinants of Economic Growth: A Cross-Country Empirical Study," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522543, December.
    8. Joseph Magnus Frimpong & Eric Fosu Oteng-Abayie, 2010. "When is Inflation Harmful? Estimating the Threshold Effect for Ghana," American Journal of Economics and Business Administration, Science Publications, vol. 2(3), pages 232-239, September.
    9. Samuel Antwi & Ebenezer Fiifi Emire Atta Mills & Xicang Zhao, 2013. "Impact of Macroeconomic Factors on Economic Growth in Ghana: A Cointegration Analysis," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(1), pages 35-45, January.
    10. Frederic S. Mishkin, 2009. "Monetary Policy Strategy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262513374, December.
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