Open Access Journal Article

Central bank policy formulation under COVID-19 in Ghana: A fit-for-purpose?

by Johnson Worlanyo Ahiadorme a,* orcid  and  Deodat E. Adenutsi b orcid
a
Macroeconomics Section, Ghana Statistical Service, Accra, Ghana
b
Department of Accounting & Finance, HTU Business School, Ho Technical University, Ho, Ghana
*
Author to whom correspondence should be addressed.
JEA  2023, 20; 2(1), 20; https://doi.org/10.58567/jea02010007
Received: 28 February 2023 / Accepted: 24 March 2023 / Published Online: 25 March 2023
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Abstract

This paper evaluates the fit-for-purpose of the monetary policy measures implemented by the Bank of Ghana in response to the COVID-19 pandemic. We examine the effectiveness of the BoG’s policy interventions in the context of vector autoregressions augmented with macroeconomic and financial indicators. We demonstrate that the BoG’s monetary policy measures have had nominal, real, and financial effects. The monetary interventions have been successful, as evidenced by the gradual reduction in the sovereign spread, improved financial stability, and increased real economic activity. Our findings suggest that balance sheet actions are less effective and should be moderated in the conduct of monetary policy in jurisdictions without zero lower bound constraints. However, the analysis indicates that in times of crisis, central banks should deploy both standard and non-standard tools to stabilize dysfunctional financial markets and avoid a deflationary spiral. The historical and variance decomposition of the data reveal that monetary policy shocks have historically made the largest contributions to the targeted macro-financial aggregates during the pandemic episodes.

Keywords: Central bank; Monetary policy; Financial stability; COVID-19; Emerging market;
Copyright: © 2023 by Ahiadorme and Adenutsi. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.
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ACS Style
Ahiadorme, J. W.; Adenutsi, D. E. Central bank policy formulation under COVID-19 in Ghana: A fit-for-purpose?. Journal of Economic Analysis, 2023, 2, 20. https://doi.org/10.58567/jea02010007
AMA Style
Ahiadorme J W, Adenutsi D E. Central bank policy formulation under COVID-19 in Ghana: A fit-for-purpose?. Journal of Economic Analysis; 2023, 2(1):20. https://doi.org/10.58567/jea02010007
Chicago/Turabian Style
Ahiadorme, Johnson W.; Adenutsi, Deodat E. 2023. "Central bank policy formulation under COVID-19 in Ghana: A fit-for-purpose?" Journal of Economic Analysis 2, no.1:20. https://doi.org/10.58567/jea02010007
APA style
Ahiadorme, J. W., & Adenutsi, D. E. (2023). Central bank policy formulation under COVID-19 in Ghana: A fit-for-purpose?. Journal of Economic Analysis, 2(1), 20. https://doi.org/10.58567/jea02010007

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