GROUP 10 PROJECT WORK.docx

It outlines the benefits gained since the

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mechanisms used to achieve it. It outlines the benefits gained since the implementation of this policy and it also examines the lags in the transmission mechanism of monetary policy. In this study, we used secondary source of data from Ghana Statistical Service (GSS), Bank of Ghana and the International Monetary Fund (IMF) to critically analyse how the Monetary Policy Committee (MPC) of the Bank of Ghana uses the policy rate as its main tool to ensure the achievement of the set target of inflation. This research brought out some key findings which revealed how the switch from monetary aggregate targeting to inflation targeting policy has helped the economy realise the lowest inflation rate since 1970. It has also revealed how the IT policy has helped strengthened the independence of MPC in the conduct of monetary policy and thus helped to identify how the adoption of the IT policy has promoted efficiency of the economy on the international market. This has been achieved through the use of flexible exchange rate policy which is a necessary requirement for the implementation of an IT policy. This study revealed the BoG’s inability to achieve its set targets except in the year 2010. The research moreover revealed the poor coordination between monetary policy and fiscal policy of the BoG and MOFEP respectively. The key recommendations from this research include the following: We recommend that, the Bank of Ghana continues with the implementation of the inflation targeting policy since it is not detrimental to growth. Also, there should be an effective collaboration between the Monetary Policy Committee and the Ministry of Finance (fiscal authorities) in setting inflation targets which would go a long way to stabilize price levels and enhance economic growth. Moreover, the objective of the Bank of Ghana should be to 5 | P a g e
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stabilize prices rather than aiming at single-digit inflation, since there is no significant relationship between economic growth and single-digit inflation. We finally recommend that, methods of data collection in the country should be improved upon to ensure proper monitoring of the performance of the economy and for making accurate projections in the near future. 6 | P a g e
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It is an undisputable fact that, monetary authorities all over the world alter their policy instruments at their disposal usually in an attempt to achieve their ultimate objective of sustainable economic growth. It is worth mentioning that, Ghana for that matter is not an exemption. In 2007, the Bank of Ghana altered the existing monetary framework, known as monetary aggregate targeting (MAT) and embraced what is now widely and popularly known as Inflation targeting (IT). Inflation targeting as a policy framework was adopted for stabilizing prices within the economy and eventually ensuring an appreciable and sustainable economic growth. The move was to improve its efforts of controlling inflation and to make its monetary policies more transparent and effective, given the good success and experience of many other countries by then. The monetary aggregate targeting regime focused on the
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