Inflation and interest rate movements in Ghana: trends and possible causal links

Paul Nkegbe () and Yazeed Abdul Mumin

International Journal of Economics and Business Research, 2014, vol. 8, issue 3, 272-295

Abstract: The relationship between inflation and interest rate has remained controversial in Ghana and this called for the investigation into the trends and causal links between the two variables. Monthly observations from 1995 to 2011 were used for analyses of trends, causality, cointegration and error correction model. The study reveals significant trends of variability over time with the trend of inflation being more volatile relative to interest rate. There is a two-way causal relationship between inflation and nominal interest rate and there exists also a long-run equilibrium relationship between the variables. The results suggest inflation in Ghana in the short-run depends on previous month's inflation rate and past interest rates, but not on current interest rate. The impulse response shows past inflation rates and nominal interest rates account for macroeconomic instability in the economy. It is recommended long-run policy measures be used to promote macroeconomic stability.

Keywords: inflation; interest rates; cointegration; error correction model; impulse response; Ghana; macroeconomic instability. (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.inderscience.com/link.php?id=64669 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ids:ijecbr:v:8:y:2014:i:3:p:272-295

Access Statistics for this article

More articles in International Journal of Economics and Business Research from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().