Abstract:
The study determines the relationship between GDP (Gross Domestic Product)
growth rate and inflationary rate in Ghana from the period 1980 to 2012. The study
employs the methods of scatter plot, correlation analysis and simple linear regression
estimated using OLS (Ordinary Least Squares). All the three approaches proved that
there is a strong negative linear relationship between GDP growth rate and inflation
rate in Ghana. That is a 1% increase in inflation rate will cause GDP growth rate to
decrease by 0.0864724%. However, a 1% decrease in inflation rate will cause GDP
growth rate to increase by 0.0864724%. This value is statistically significant at the
5% level of significance. Therefore, policy makers should formulate and implement
monetary, fiscal and physical policies that will continue to keep inflation rate
downward to enhance economic growth and stability
