Academic journal article Atlantic Economic Journal

Structural Adjustments, Devaluation, and Inflationary Pressures in Ghana

Academic journal article Atlantic Economic Journal

Structural Adjustments, Devaluation, and Inflationary Pressures in Ghana

Article excerpt

Over the last 10 years, Ghana has undertaken one of the most comprehensive structural adjustment programs in order to address the country's poor economic performance. Critics of the program argued that the massive devaluation of the Ghanaian currency would unleash a wave of inflationary pressures in the country. However, a recent study by Chhibber and Shafik ["Devaluation and Inflation with Parallel Markets: An Application to Ghana," Journal of African Finance and Economic Development, Spring 1992], concluded that devaluation in the official exchange market had no effect on Ghana's inflationary pressures because prices had already adjusted to the exchange rate prevailing in the parallel foreign exchange market. They found that since 1986 devaluations had contributed to a reduction in inflationary pressures in Ghana.

This study disputes the above findings, using the Granger causality and an autoregressive distributed lag polynomial technique in estimating a partial Ghanaian inflation and devaluation model over the period from 1970 I - 92 IV,

[P.sub.t] + [Theta][E.sub.t] = L[(e).sup.M] [P.sub.t-k] + L[(c).sub.G][E.sub.t-k] + [U.sub.t] (1)

[E. …

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