The effect of fiscal policy and monetary policy on Ghana’s economic growth: Which policy is more potent?

Abstract

The aims of this study were to examine the relative importance of monetary policy and fiscal policy on economic growth in Ghana and then determine which of these two policies is more powerful in promoting economic growth in Ghana. The study period was from 1980 to 2012. The method of Ordinary Least Squares estimation technique was used in this study. The results obtained from the three multiple regressions were spurious free. The study revealed that monetary policy impacts on the Ghanaian economy positively. Also, the study found that fiscal policy affected the Ghanaian economy positively. Finally, the study revealed that monetary policy is more powerful in promoting economic growth in Ghana. The study recommends that monetary policies implemented by the Bank of Ghana should promote favorable investment atmosphere through appropriate stabilization of interest rates, lending rates, inflationary rates, and exchange rates to promote and ensure economic growth, economic stability, economic sustainability and economic development in Ghana