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Inflation, Inflation Uncertainty, and Growth: Evidence from Ghana

Bernard Njindan Iyke and Sin-Yu Ho ()

MPRA Paper from University Library of Munich, Germany

Abstract: Inflation and inflation uncertainty are critical factors influencing the functioning of markets, and thus the efficient flow of economic activities. In this study, we investigated the effects of inflation and inflation uncertainty on growth in Ghana. Unlike majority of the previous studies, we distinguished the short-run effects of inflation and inflation uncertainty on growth from the long-run effects. Also, unlike the previous studies, we examined whether increases in inflation uncertainty have the same effects on growth as decreases in it. By taking linear and nonlinear specifications to a dataset covering the period 1963 to 2015, we found that inflation has both short and long-run negative effects on growth. Inflation uncertainty has differential short-run effect and a negative long-run effect on growth. Increases in inflation uncertainty hurt growth, while decreases may reverse this pattern but slowly. Both inflation and inflation uncertainty are critical determinants of growth in the country. To promote growth, policymakers should continue to pursue a lower inflation target, while ensuring minimum inflation uncertainty.

Keywords: Inflation; Inflation Uncertainty; Growth; Ghana (search for similar items in EconPapers)
JEL-codes: C22 E31 O47 O55 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gro, nep-mac and nep-mon
Date: 2018-03
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