The effect of inflation on economic growth in Ghana, 1995-2019: Post democratic analysis
1 PSS Ghana Creative Agency, Research and Design, Kumasi, Ghana. Phone (+233 2455 37425).
2 Moisob Adamu, Business School, Ghana Institute of Management and Public Administration (GIMPA), Ghana.
3 Miilon Sommik-Duut, National Ambulance Service (NAS), Kumasi, Ghana.
4 Fatawu Abdul Seidu, Ghana Water Company, Operation, Brekum, Ghana.
Research Article
World Journal of Advanced Research and Reviews, 2021, 12(03), 230–242
Article DOI: 10.30574/wjarr.2021.12.3.0660
Publication history:
Received on 26 October 2021; revised on 11 December 2021; accepted on 13 December 2021
Abstract:
Background: One of the fundamental goals of macroeconomic policy in many nations, both developed and developing, is to foster economic development while keeping inflation low. There has been a debate as to whether inflation impacts negatively on economic growth or rather promotes economic growth. The study is motivated by this controversy and used time-series data from 1995 to 2019 in Ghana to examine the relationship between inflation and economic growth, establish the long-run effect and also test whether there exists a causal effect between inflation and economic growth.
Method: The review utilized Ordinary Least Square (OLS) regression examination to inspect the impact of inflation on economic growth and while long run co-integration relationship was additionally decide utilizing Fully Modified (FM-OLS) regression analysis. Granger causality was investigated to see if there is a causal impact among inflation and economic growth. Model diagnoses were performed to discover the strength of the discoveries where autocorrelation, multicollinearity, normality test and heteroscedasticity were tested.
Results: The review uncovered that, inflation has a negative measurably irrelevant impact on economic growth at 5% basic level. The concentrate likewise uncovered that there was co-integration relationship between inflation and economic growth during the time of viable 1995-2019. There was no causal impact among inflation and economic growth, in this way neither inflation nor economic growth Granger-Causes the other. The study suggest that inflation targeting ought to be the best financial approach measure for economic growth by keeping up with the rate at 8+/-2%.
Keywords:
Inflation; Economic; GDP; Unit root; Co-integration; Augmented Dickey-Full (ADF); FM-OLS; Causality
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