AbstractsEconomics

The study sought to investigate the effect of monetary policy on output and prices by specifically identifying the responsiveness of output and prices to monetary policy innovations and the variations in output and prices that is explained by the monetary policy variables. The study employed the Structural Vector Autoregressive (SVAR) modelling technique on quarterly time series data on real GDP, Consumer Price Index (CPI), the Monetary Policy Rate (MPR), broad money supply (M2) and real effective exchange rate from 1980 to 2012. The study further used the Impulse response functions and Forecast Error Variance Decomposition to examine the stochastic shocks of the monetary policy variables’ innovations on output and prices. The study found a weak and slow ability of monetary policy to influence output and price in Ghana. The study however, found evidence of MPR as the most effective monetary policy variable that influences output whilst money supply is the most effective monetary policy variable that influences prices. A thesis presented to the Department of Economics, College of Humanities and Social Sciences in partial fulfilment of the requirement for the degree of Master of Philosophy in Economics, 2016 KNUST