Testing for asymmetry in monetary policy rule for small-open developing economies: Multiscale Bayesian quantile evidence from Ghana

Akosah, Nana Kwame; Alagidede, Paul; Schaling, Eric

doi:10.1016/j.jeca.2020.e00182

Cited by 4 publications

(3 citation statements)

References 106 publications

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“…With regards to monetary policy, Ghana was the first to transition to an indirect monetary policy regime adopting a partial Inflation Targeting (IT) framework in 2002 (Quartey and Afful-Mensah, 2014) and becoming the first developing country in the world to fully adopt the inflation targeting regime in May 2007 (Akosah et al. , 2019).…”

Section: Datamentioning

confidence: 99%

Monetary policy and nonperforming loan ratios in a monetary union; a counterfactual study

Napari¹,

Özcan²,

Khan³

2023

JES

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PurposeFor close to two decades, the West African Monetary Zone (WAMZ) has been preparing to launch a second monetary union within the ECOWAS region. This study aims to determine the impact such a unionised monetary regime will have on financial stability as represented by the nonperforming loan ratios of Ghana in a counterfactual framework.Design/methodology/approachThis study models nonperforming loan ratios as dependent on the monetary policy rate and the business cycle. The study then used historical data to estimate the parameters of the nonperforming loan ratio response function using an Autoregressive Distributed Lag (ARDL) approach. The estimated parameters are further used to estimate the impact of several counterfactual unionised monetary policy rates on the nonperforming loan ratios and its volatility of Ghana. As robustness check, the Least Absolute Shrinkage Selection Operator (LASSO) regression is also used to estimate the nonperforming loan ratios response function and to predict nonperforming loans under the counterfactual unionised monetary policy rates.FindingsThe results of the counterfactual study reveals that the apparent cost of monetary unification is much less than supposed with a monetary union likely to dampen volatility in non-performing loans in Ghana. As such, the WAMZ members should increase the pace towards monetary unification.Originality/valueThe paper contributes to the existing literature by explicitly modelling nonperforming loan ratios as dependent on monetary policy and the business cycle. The study also settles the debate on the financial stability cost of a monetary union due to the nonalignment of business cycles and economic structures.

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Section: Datamentioning

confidence: 99%

Monetary policy and nonperforming loan ratios in a monetary union; a counterfactual study

Napari¹,

Özcan²,

Khan³

2023

JES

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“…The study included supply of money, real interest rate and inflation as policy variables in a Panel-VAR model and revealed a symbiotic association among monetary policy and stock exchange activities. Antwi et al [28] and Akosah et al [39] examined the interactions between inflation, exchange rate, output, rate of interest and money supply in Ghana and concluded that the apex bank's reactions to these economic variables depend on the perceived policy targets. In their investigation on the effects of some macroeconomic variables on the exchange rate in Ghana, Antwi et al [28] showed that money supply, inflation and interest rate indirectly influenced the exchange rate.…”

Section: Literature Reviewmentioning

confidence: 99%

Monetary Policy, External Shocks and Economic Growth Dynamics in East Africa: An S-VAR Model

2022

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Resulting from the incessant political and economic uncertainty that bedevils the EAC region in the recent past, the various governments have used monetary policy changes in response to shocks from macroeconomic variables. However, the available literature shows a non-agreement by scholars as far as the dynamics in monetary policy, external shocks and macroeconomic activity connections are concerned, for both country-by-country analyses and regional assessments. This article widens the frontiers of knowledge about how the dynamics of monetary policy, external shocks and macroeconomic performance interact within the EAC economic region. We adopted the S-VAR method because of its contemporary nature as far as a transmission of monetary policy approach is concerned. The interconnectivity among the countries of EAC is an indication that any shock to the price of commodities (non-oil commodities) has significant implication on the exchange rate, which will be channelled through the supply of money and monetary policy to the GDP. The need to diversify the productive and export base of member countries, compared to the continuous dependence on one or a few products as the major source of income, is hereby advocated.

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“…The relationships between inflation, exchange rate, output, rate of interest, and money supply in Ghana were investigated by Akosah et al (2020), who concluded that the apex bank's reactions to these economic variables are dependent on the perceived policy aims. Antwi et al (2020) found that money supply, inflation, and interest rate indirectly influenced the exchange rate in their study of the impacts of certain macroeconomic variables on the exchange rate in Ghana.…”

Section: Literature Reviewmentioning

confidence: 99%

West African Monetary Policy, External Shocks and Economic Growth Dynamics: An S-Var Model

Muhammed

Tela²,

Wahab³

2022

LBIBF

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As a result of the West African region's continuous political and economic instability, various economies have used monetary policy changes to respond to shocks from macroeconomic causes. Scholars disagree on the mechanisms of monetary policy, external shocks, and macroeconomic activity links in an economy, according to the available literature in both inter-regional and intra-regional evaluations. This article promotes understanding and management of external shocks in monetary policy by focusing on two key goals. (1) To investigate external shocks, macroeconomic performance, and the dynamics of monetary policy in Western African countries. (2) Use the S-VAR method of estimate to investigate the impact of these economic indices on monetary policy dynamics in Nigeria, Ghana, Cameroon, and Niger. The S-VAR method was chosen because it is useful for analysing macroeconomic shocks and monetary policy transmission. The findings reveal that the West African countries are so interconnected, any change in the price of non-oil commodities would have a significant impact on the exchange rate, which will be channelled through policy rates to GDP. We recommend and emphasise the need of diversifying member countries' productive and export bases rather than continuing to rely on one or a few items as the primary source of income.

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Testing for asymmetry in monetary policy rule for small-open developing economies: Multiscale Bayesian quantile evidence from Ghana

Cited by 4 publications

References 106 publications

Monetary policy and nonperforming loan ratios in a monetary union; a counterfactual study

Monetary policy and nonperforming loan ratios in a monetary union; a counterfactual study

Monetary Policy, External Shocks and Economic Growth Dynamics in East Africa: An S-VAR Model

West African Monetary Policy, External Shocks and Economic Growth Dynamics: An S-Var Model

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