A Study Of Ghana’s Money Supply,Inflation Rate And Economic Growth

The relationship between inflation rate and economic growth has always been a key issue for countries in assessing their economic situation and formulating relevant economic policies.It is also an important measure for the coordinated development of the real economy and the virtual economy.In view of the traditional theory that inflation is a monetary phenomenon,when considering the relationship between inflation rate and economic growth in a country,the country’s money supply is an influential factor.At the same time,Ghana’s economy has grown rapidly in recent years and is expected to become the benchmark for economic growth in Africa.However,due to the high inflation rate and high volatility over the years,Ghana’s current economic performance is not stable.How Ghana maintains a stable and rapid economic growth rate at a high inflation rate,and how to adjust its inflation rate or formulate an appropriate monetary policy in the future to promote its economy to achieve sustainable and stable growth is a problem that needs attention at present.On the basis of combing relevant theories and literatures,this paper first compares and analyzes the typical facts of money supply,inflation rate and economic growth in Ghana over the years.Subsequently,this paper examines Ghana’s money supply and currency from 1980 to 2017,1980 to 2007(before the Ghanaian currency reform)and 2008 to 2017(after the Ghanaian currency reform)by establishing a three vector autoregressive models.Since the relationship between the three is difficult to reach consensus in the existing research,the empirical methods used in this paper include data stability test,Granger causality test,impulse response analysis and variance decomposition test,etc.The causal test seeks to clarify the causal relationship between inflation and economic growth in Ghana.By comparing the results of the three models,it can be seen that between 1980 and 2017,Ghana’s economic growth promoted the growth of Ghana’s money supply,while Ghana’s economic growth led to domestic inflation in the country;between 1980 and 2007.Ghana’s economic growth led to an increase in the money supply,and the money supply further increased the inflation rate in Ghana.During the period from 2008 to 2017,Ghana’s money supply growth promoted Ghana’s economic growth,and Ghana’s inflation rate also increased.It promoted Ghana’s economic growth;while Ghana’s economic growth also boosted its money supply.Based on the empirical results,this paper proposes corresponding policy recommendations,including improving the legal system,strengthening the coordination between the financial system and the real economy;adjusting the currency structure,adjusting the ratio of savings currency to liquid currency from the monetary level;rationally using monetary policy,adjusting Ghana Domestic inflation rate;establish a scientific and rational monitoring and early warning mechanism.