Title: Central bank independence and monetary policy outcomes in Ghana: a Bayesian structural time series approach

Authors: Isaac Bentum-Ennin; Paul Owusu Takyi

Addresses: Department of Economics Studies, School of Economics, University of Cape Coast, Cape Coast, 00233, Ghana ' Department of Economics, Kwame Nkrumah University of Science and Technology, Kumasi, 00233, Ghana

Abstract: The paper examines the impact of central bank independence (CBI) on monetary policy outcomes in Ghana using annual data from 1985 to 2019 and the novel Bayesian structural time series approach. The results reveal that the granting of autonomy to the Bank of Ghana has increased economic growth by about 43% in relative terms and 1.9% in absolute terms. In absolute terms, the CBI has increased the value of the Ghana cedi to the US dollar by 1.8. Relatively, the loss in value of the local currency during the CBI period is about 400%. Also, although CBI resulted in a reduction in inflation by 10% and 41% in absolute and relative terms, respectively, these effects are not statistically significant. From a policy perspective, strengthening the operations of the Bank of Ghana is necessary to achieve its desired objectives of lower inflation, higher economic growth, and a strong local currency.

Keywords: CBI; central bank independence; Bayesian structural time series; monetary policy; inflation; exchange rate; Ghana.

DOI: 10.1504/IJMEF.2024.140530

International Journal of Monetary Economics and Finance, 2024 Vol.17 No.4, pp.280 - 300

Received: 08 Feb 2023
Accepted: 02 Nov 2023
Published online: 22 Aug 2024 *

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