Book contents
- Frontmatter
- Contents
- List of Contributors
- List of Acronyms
- PART ONE OVERVIEW
- PART TWO MACROECONOMY, TRADE & FINANCE
- 4 Persistent Public Sector Deficits & Macroeconomic Instability in Ghana
- 5 Effects of Exchange-Rate Volatility & Changes in Macroeconomic Fundamentals on Economic Growth in Ghana
- 6 Ghana's Exchange-Rate Reform & Its Impact on Balance of Trade
- 7 Export Performance & Investment Behaviour of Firms in Ghana
- 8 Household Savings in Ghana: Does Policy Matter?
- 9 Banking Competition & Efficiency in Ghana
- 10 Rural & Microfinance Regulation in Ghana: Implications for Development of the Industry
- PART THREE POVERTY, EDUCATION & HEALTH
- Index
5 - Effects of Exchange-Rate Volatility & Changes in Macroeconomic Fundamentals on Economic Growth in Ghana
from PART TWO - MACROECONOMY, TRADE & FINANCE
Published online by Cambridge University Press: 05 February 2013
- Frontmatter
- Contents
- List of Contributors
- List of Acronyms
- PART ONE OVERVIEW
- PART TWO MACROECONOMY, TRADE & FINANCE
- 4 Persistent Public Sector Deficits & Macroeconomic Instability in Ghana
- 5 Effects of Exchange-Rate Volatility & Changes in Macroeconomic Fundamentals on Economic Growth in Ghana
- 6 Ghana's Exchange-Rate Reform & Its Impact on Balance of Trade
- 7 Export Performance & Investment Behaviour of Firms in Ghana
- 8 Household Savings in Ghana: Does Policy Matter?
- 9 Banking Competition & Efficiency in Ghana
- 10 Rural & Microfinance Regulation in Ghana: Implications for Development of the Industry
- PART THREE POVERTY, EDUCATION & HEALTH
- Index
Summary
Introduction
This study explores the determinants of per person real output growth, exchange-rate volatility, and price inflation — and their interactions and implications for economic development — as well as the roles of money and interest rates in price and output determination in Ghana. The interrelated problems of inflation, exchange-rate instabilities and unstable output (or economic) growth afflict many countries. In the less developed countries (LDCs), high inflation is induced in part by excessive money-supply growth often resulting from easy fiscal policy, with uncertain effects on real output growth. Inflation is a problem because, ceteris paribus, it lowers real incomes, discourages savings, makes productive inputs more expensive — and may act as a disincentive to hard work, thereby leading to sub-optimal per person real output growth (or economic development).
Unstable exchange rates disrupt international trade and investment (on which many LDCs depend for essential capital inputs and consumer goods) because agents are uncertain about the specific exchange rates to use for transactions (Hodrick, 1989: 433–459). LDCs with overvalued fixed exchange rates (and thriving black markets) may use periodic devaluations to realign their currencies, contributing in part to unstable output growth. Other LDCs (e.g., Ghana, Nigeria) which have shifted to flexible exchange-rate regimes experience asymmetric exchange-rate volatility (reflected by continuous currency weakness). Hence, exchange-rate policy would be expected to influence a developing country's trade balance, net capital inflows, prices and output growth.
- Type
- Chapter
- Information
- Economy of GhanaAnalytical Perspectives on Stability, Growth and Poverty, pp. 95 - 110Publisher: Boydell & BrewerPrint publication year: 2008