Question

what are the major issues of monetary policy in Ghana

Answer 1

ANS : Monetary policy is the macro economic policy laid down by the central government. It involves movement of money supply & Interest rate & is the demand side economic policy used by the government to achieve macro- economic objectives like Inflation, consumption, growth & Liquidity.

Major Issues of Monetary policies :

1. Choosing Targets - Possible targets includes interest rates, money growth rate & price level.
2. Political Pressures - Political enviornment affects monetary policy in both aspect positive or negative.
3. Degree of Impact on economy - Monetary policies work their way through the financial system to have impact on macroeconomic performance.
4. Rational Expectations - It states that people use all the available information to make forecast about the future economic activity & the price level & they adjust their behaviour to these forecast.

The recent study of monetary policies & Financial policies in Ghana revealed that key monetary indicator is relatively effective during those periods.

There is fiscal imbalance in the country that need a greater fiscal discipline given by the monetary policies .

The Bank of Ghana Act 612 make the bank independent to set the Interest rates. Although the Bank is not bound by the law to explain the development to the ministry of finance or to the parliament is targets are not achieved, The Governor of bank of Ghana had summoned to the finanace committe of of parliament to explain the developments within the economy.

The bank seek to achieve the government's inflation targets bt setting a monetary policy interest rates which is decided by the Monetary Policy committee (MPC). The MPC consists of seven members- 5 memebers from Bank of Ghana & 2 external members appointed by minister of finance. The meeting are governed by the Governor of Bank of Ghana.