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Public debt and inflation: Empirical evidence from Ghana

Akingbade Aimola and Nicholas Odhiambo

No 27063, Working Papers from University of South Africa, Department of Economics

Abstract: This paper investigates the impact of public debt on inflation in Ghana using annual data duringthe period 1983-2018. The study uses the Autoregressive Distributed Lag (ARDL) bounds testingapproach to cointegration and an error correction model to examine this linkage. The cointegratingregression results reveal evidence of a stable long run relationship between inflation and theexplanatory variables in the presence of a structural break. The findings also show a positive andsignificant impact of public debt on inflation. These results were found to hold, irrespective ofwhether the regression was conducted in the short run or the long run. The study confirms thepresence of the inflationary effects of public debt in Ghana. The government should, therefore, beprudent when considering increases in public debt to minimise volatility in inflation and itsassociated risks to the economy.

Keywords: public debt; inflation; ARDL; Ghana. (search for similar items in EconPapers)
Date: 2021-01
New Economics Papers: this item is included in nep-mac
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