An empirical analysis of the money supply process in Ghana: 1983-2006

Aliyu Sanusi

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines the major drivers of the asset counterpart of the observed money supply in Ghana since the adoption of the Economic Recovery Programmes in Ghana. Using the traditional money multiplier approach, the relative contributions of fiscal financing and capital inflows to the money supply process were examined. It is found that until the mid nineties, fiscal deficit financing was the major driver of the money supply process. In the later years, however, changes in the Net Foreign Assets of the Bank of Ghana, driven largely by foreign aid and remittances inflows, appear to be the major cause of monetary expansion. Until 2003 when discipline improved, government borrowing was also the major component and source of changes in the net domestic assets of the BoG. This, the paper argues, implies that the use of foreign exchange market intervention could be an effective way of controlling money supply.

Keywords: Money Supply Process; Capital flows; Money Multiplier; Ghana (search for similar items in EconPapers)
JEL-codes: E51 E52 F35 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (2)

Published in Abuja Journal of Banking and Finance 1.2(2010): pp. 115-128

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Related works:
Working Paper: An empirical analysis of the money supply process in Ghana: 1983-2006 (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:29500

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