The impact of inflation on economic growth in Ghana since 1960
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Date
2002-11-25
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Abstract
Ghana was born in 1957 in the midst of highly favourable economic conditions, and there was great optimism about the development of the economy. In terms of modem western criteria, Ghana had a promising start as one of the richest, most successful and politically matured regions of Black Africa. Per capita income was reportedly the highest, real GDP was satisfactory, sterling reserves were substantial and development plans were well formulated. In the first few years of independence, Ghana experienced satisfactory rates of growth. By the standard of developing countries, she exhibited an exceptionally good economic performance and in 1960 she was far ahead of many other developing countries. With a per capita income of £70 in 1960 the nation fared better than, for example, Nigeria (29), Egypt (56) and India (25) (Huq, M.M., 1989: 46),
However, according to World Bank estimates in 1984, the per capita income of Ghana was (US $350). Thus, a country, which in the 1960 was one of the leading developing countries, has now joined the rank of the low income developing countries with neighbours such as Nigeria, Ivory Coast and Liberia showing much higher per capita income of US $730, US $610 and US $470 respectively in 1984.
Currently, the situation might have further deteriorated and it is in the light of this that the nation has been declared a Highly Indebted Poor Country (HIPC). One of the most serious problems affecting the performance of the economy is the high rate of inflation as identified by the national economic forum held in 1997. In particular, inflation slows down economic progress by discouraging savings and investments among other things. The present study is therefore designed to investigate empirically and theoretically, the impact of inflation on economic growth in Ghana.
This study has examined the effect of inflation on economic growth in Ghana from 1960 to 2000. The results have revealed that during the period under review, the impact of inflation on growth has been undesirable. However, on empirical basis, the degree of correlation between inflation and growth was found to be weak contrary to the evidence suggested by theory.
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A thesis submitted to the Department of Economics and Industrial Management,
Kwame Nkrumah University of Science and Technology in partial
fulfilment of the requirements for the award of the degree of Master of Arts in Economics, 2002