The effect of monetary policy on output and prices in Ghana
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Date
MARCH, 2016
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Abstract
The study sought to investigate the effect of monetary policy on output and prices by specifically
identifying the responsiveness of output and prices to monetary policy innovations and the
variations in output and prices that is explained by the monetary policy variables. The study
employed the Structural Vector Autoregressive (SVAR) modelling technique on quarterly time
series data on real GDP, Consumer Price Index (CPI), the Monetary Policy Rate (MPR), broad
money supply (M2) and real effective exchange rate from 1980 to 2012. The study further used
the Impulse response functions and Forecast Error Variance Decomposition to examine the
stochastic shocks of the monetary policy variables’ innovations on output and prices. The study
found a weak and slow ability of monetary policy to influence output and price i n Ghana. The
study however, found evidence of MPR as the most effective monetary policy variable that
influences output whilst money supply is the most effective monetary policy variable that
influences prices.
Description
A thesis presented to the Department of Economics, College of Humanities and Social Sciences in partial fulfilment of the requirement for the degree of Master of Philosophy in Economics,