Emerging Relationships Between Macroeconomic Indicators and Real Economic Activities in Ghanaian Economy
Volume 4, Issue 6, December 2015, Pages: 118-124
Received: Nov. 9, 2015;
Accepted: Nov. 19, 2015;
Published: Dec. 10, 2015
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Nana Kena Frempong, Department of Mathematics, College of Science, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana
Peter Amoako-Yirenkyi, Department of Mathematics, College of Science, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana
Akoto Yaw Omari-Sasu, Department of Mathematics, College of Science, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana
Derrick Asamoah Owusu, Department of Mathematics, College of Science, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana
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The aim of this study is to empirically estimate the sensitivity of inflation and interest rate together with some key macroeconomic variables on real economic activity index. Secondly, to investigate the direction of causality between inflation and interest rate, interest rate and real economic activity index, as well as between inflation and real economic activity index. Thirdly, to investigate how the real economic activity reacts to shocks from inflation and interest rate and other key macroeconomic variables. A deterministic time series regression model, vector autoregressive model, cointegration method and Granger Causality Analysis were implored in the analysis. The results show that there exists a unique long-run relationship between real economic activity and the other variables. Accordingly, inflation is identified as important determinant of real economic activity growth in Ghana. Conversely, real economic activity was found not to significantly determine inflation and interest rate within the period under investigation. The relationship between inflation and interest rate is, however, significant determined positive in either direction. This means that the link between inflation, interest rate and economic activity is not immediately automatic.
Macroeconomic, Vector Autoregressive, Cointegration, Granger Causality
To cite this article
Nana Kena Frempong,
Akoto Yaw Omari-Sasu,
Derrick Asamoah Owusu,
Emerging Relationships Between Macroeconomic Indicators and Real Economic Activities in Ghanaian Economy, Economics.
Vol. 4, No. 6,
2015, pp. 118-124.
Copyright © 2015 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/
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