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An empirical analysis of the money supply process in Ghana: 1983-2006


  • Sanusi, Aliyu Rafindadi


This paper examines the major drivers of the asset counterpart of the observed money supply in Ghana since the adoption of the Economic Recovery Programmes in Ghana. Using the traditional money multiplier approach, the relative contributions of fiscal financing and capital inflows to the money supply process were examined. It is found that until the mid nineties, fiscal deficit financing was the major driver of the money supply process. In the later years, however, changes in the Net Foreign Assets of the Bank of Ghana, driven largely by foreign aid and remittances inflows, appear to be the major cause of monetary expansion. Until 2003 when discipline improved, government borrowing was also the major component and source of changes in the net domestic assets of the BoG. This, the paper argues, implies that the use of foreign exchange market intervention could be an effective way of controlling money supply.

Suggested Citation

  • Sanusi, Aliyu Rafindadi, 2010. "An empirical analysis of the money supply process in Ghana: 1983-2006," MPRA Paper 29494, University Library of Munich, Germany, revised 2010.
  • Handle: RePEc:pra:mprapa:29494

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    References listed on IDEAS

    1. Dordunoo, C.K. & Donkor, A., 1998. "Ghana: Monetary Targeting and Economic Development," Papers 77, African Economic Research Consortium.
    2. Younger, Stephen D., 1992. "Aid and the Dutch disease: Macroeconomic management when everybody loves you," World Development, Elsevier, vol. 20(11), pages 1587-1597, November.
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    Cited by:

    1. Prakash Kumar Shrestha Ph.D., 2013. "An Empirical Analysis of Money Supply Process in Nepal," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 25(2), pages 17-42, October.

    More about this item


    Money Supply Process; Capital flows; Money Multiplier; Ghana;

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers


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