Volume 4, Issue 2, June 2019, Page: 53-63
Examining the Factors Underlining the Inflationary Phenomenon in Ghana – A Dynamic ARDL Analysis
Emmanuel Atta Anaman, Department of Banking and Finance, School of Business, University of Education, Winneba, Ghana
Received: May 15, 2019;       Accepted: Jun. 23, 2019;       Published: Jul. 1, 2019
DOI: 10.11648/j.jbed.20190402.13      View  27      Downloads  10
The phenomenon of inflation is one of the most widely discussed economic issues across the world and for this reason has continued to remain very relevant and visible within the policy domain. This is because it affects the economic fortunes of the principal actors within the economy from the low to the high income. This study adds to the existing literature on inflation by identifying the short and long run factors which influence its trajectory in the Ghanaian economy. The study adopts the Autoregressive Distributed Lag approach to comprehensively establish the long and short run determinants of inflation based on the data set spanning from 1979 to 2016 and the empirical analysis shows that price level is in the long run significantly determined by food crop production, crude oil prices, population, output of goods and services and money supply but in the short run the only variable which does not impact significantly on the price level variable is the interest rate proxied by the policy rate. It is also established that the system is able to correct about 60% of the deviations from its equilibrium position in every quarter. The main recommendation that emanates from the study is that policy makers instead of dealing with inflation mainly from the orthodox monetary perspective must also begin to pay more attention to the supply side issues in the economy.
Bounds Test, Co Integration, Error Correction, Inflation and Stationarity
To cite this article
Emmanuel Atta Anaman, Examining the Factors Underlining the Inflationary Phenomenon in Ghana – A Dynamic ARDL Analysis, Journal of Business and Economic Development. Vol. 4, No. 2, 2019, pp. 53-63. doi: 10.11648/j.jbed.20190402.13
Copyright © 2019 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Hossain, M., J., & Islam, N. (2013). An economic analysis of the determinants of inflation in Bangladesh. The International Journal of Social Sciences, 11 (1).
Kandil, M., & Morsy, H. (2009). Determinants of inflation in GCC. International Monetary Fund (IMF) Working Paper, WP/09/82.
Lim, C., H., & Papi, L. (1997). An econometric analysis of determinants of inflation in Turkey. IMF Working paper, 97/170, Washington DC.
Bashir, F., Nawaz, S., Yasin, K., Khursheed, U., Khan, J., & Qureshi, M., J. (2011). Determinants of inflation in Pakistan: an econometric analysis using Johanssen co-integration approach. Australian Journal of Business and Management, 1 (5), 71-82.
Hashim, M., J., Osman, I., & and Elias, N., L. (2014). The determinants of inflation in Malaysia. Presented at 3rd International Conference on Accounting, Business and Economics (ICABEC), 2014.
Elgammal, M., M., & Eissa, M., A. (2015). Key determinants of inflation and monetary policy in the emerging markets: evidence from Vietnam. Afro-Asian Journal of Finance and Accounting, X (Y).
Akinbobola, T., O. (2012). The dynamics of money supply exchange rate and inflation in Nigeria. Journal of Applied Finance and Banking, 2 (4).
Kwakye, J., K. (1981). An econometric analysis of price behavior. University of Ghana Thesis.
Chhibber, A., & Shafik, N. (1990). Exchange reform parallel market and inflation in Africa: the case of Ghana. World Bank Working Paper (WPS427). Washington DC: World Bank.
Sowa, N., K., & Kwakye, J., K. (1993). Inflationary trends and control in Ghana. African Economic Research Consortium (AERC), Research Paper 22, Nairobi, Kenya.
Gyebi, F., & Boafo, K., G. (2013). Macroeconomic determinants of inflation in Ghana from 1990-2009. International Journal of Business and Social Research, 3 (6).
Enu, P., & Havi, D., E. (2014). Macroeconomic determinants of inflation in Ghana: A co integration approach. International Journal of Academic Research in Business and Social Sciences, 4 (7).
Chiaraah, A., & Nkegbe, P., K. (2014). GDP growth, money growth, exchange rate and inflation in Ghana. Journal of Contemporary Issues in Business Research, 3 (2).
Acquah-Sam, E. (2017). Influencers of inflation in Ghana. European Scientific Journal, March edition 13 (7).
Sanusi, A., R. (2010). Exchange rate pass through to consumer prices in Ghanaː Evidence rate pass through to consumer prices in Ghana: evidence from structural vector auto regression. Journal of Econometrics, 3 (3).
Sahminan, S. (2002). Exchange rate pass through into import prices: empirical evidences from South East Asian countries. Journal of Economic Research, 2 (4).
Sargent, T., J., & Wallace, R. (1981). Some unpleasant monetarist arithmetic. Quarterly Review, Federal Reserve Bank of Minneapolis, Fall Issue.
Montiel, P., J. (1989). Empirical analysis of high-inflation episodes in Argentina, Brazil and Israel. IMF Staff Papers, 3, 527-49.
Lissovolik, B. (2003). Determinants of inflation in a transition economy: the case of Ukraine. IMF Working Paper, European II Department.
Granger, C., W., J., & Newbold, P. (1974). Spurious regression in econometrics. Journal of Econometrics, 2 (2), 111-120.
Harris, R., & Sollis, R. (2003). Applied time series modelling and forecasting. United Kingdom: Wiley Press.
Thomas, R., L. (1993). Introductory economics: theory and applications. (2nd ed.). London, UK: Longman Press.
Anaman, E., A., Gadzo, S., G., Gatsi, J., G., & Pobbi, M. (2017). Fiscal aggregates government borrowing and economic growth in Ghana: an error correction approach. Advances in Management and Applied Economics, 7 (2), 83-104.
Pesaran, M., H., & Pesaran, B. (1997). Working with microfit 4.0: international econometric analysis. Oxford: Oxford University Press.
Banerjee, A., Dolado, J., Galbraith, J., & Hendry, D. (1993). Co integration, error correction and econometric analysis of non-stationary data. Oxford: Oxford University Press.
Frimpong, J., M., & Oteng-Abayie, E., F. (2006). Bounds testing approach: an examination of direct investment, trade and growth relationship. MPRA Paper, 352.
Peasaran, M. H., Shin, Y. and Smith, R. J. (2001). Bounds testing for Relationships. Journal of Applied Econometrics, Vol 16 (3) pp 289-326.
Browse journals by subject