INFLATION DYNAMICS IN GHANA OVER THE 1970-2003 PERIOD

Abstract

In this paper we applied the theoretical model developed by Fullerton in 2004 to analyze inflationary dynamics in Ghana. The nature of the time series data led to the use of an error-correction approach to analyze the relationship among price level, money supply, price of imported inputs and wage levels. Cointegration analysis suggests that price level has a long-run relationship with money supply, price of imported inputs and wage levels. The error correction results for the price equation provide evidence that inflation in Ghana over the 1970 -2003 period has been significantly determined by money supply. The policy advice is that money supply should serve as one main target of curbing inflation Ghana.