A small macroeconomic model of trade and inflation in Ghana

Abstract

This paper contains an empirical investigation of the effects of trade and inflation on a conventional macroeconometric model for Ghana. First, the results corroborate the findings of the Fund that both devaluation and credit restraint are effective in addressing the balance of payment issues facing Ghana. Second, the direction and time pattern of the effects of these two policy experiments are different. Third, further depreciation of the domestic currency is unfavourable to the cause of curbing inflation in Ghana. It rather leads to price increases and is a source of fuelling inflation, and could lead to a spiral of inflation through the agitation for higher wages by employees