Hawkish shift in Ghana’s central bank’s monetary policy reaction function: a fiscal connection

This study examines Ghana's central bank's monetary policy under Ghana's inflation-targeting (IT) monetary policy regime since 2002. We find that Ghana's central bank pursued a passive monetary policy under the unofficial IT monetary policy regime and hence cannot explain the decline in Ghana's inflation rate during this period. We also find that Ghana's central bank switched its monetary policy from passive to active under the official IT monetary policy framework, and hence cannot also explain Ghana's rising inflation rate observed during this period. We provide evidence suggesting that Ghana's central bank's policy change might have been influenced by fiscal factors.