Available online at www.sciencedirect.com ScienceDirect Review of Development Finance 4 (2014) 115–125 Financial and monetary policies in Ghana: A review of recent trends Peter Quartey a,∗, Gloria Afful- hana Accra Abstract This stud na. T remarkable ly eff the fiscal im e nee cannot achie er, al lending rate anks interest rates the c © 2014 Afri JEL classifica Keywords: Fi 1. Introdu Moneta together wi achieved while fiscal and other macroeconomic challenges are addressed. These policies and strategies have been dynamic and in line with global trends in order to be relevant. Monetary policy involves the use of different measures with the aim of regulat- ing the valu expected le any monet of balance output grow In order policies ha undergone this begun ∗ Correspon E-mail ad gloria.afful@ Peer review u 1879-9337 © B.V. http://dx.doi.o way How ts su emp open market operations (Ncube, 2007). In the specific case of Ghana, monetary policies have evolved from the use of direct instruments1 to the market-based approach where the main tar- get of policy is the money supply (see Alexander et al., 1995; Roe s und Open accee, supply and cost of money in consonance with the vel of economic activity. The common objectives of ary policy may include price stability, maintenance of payments equilibrium, creation of employment, th, and sustainable development. to be effective and globally acceptable, monetary ve to be dynamic. Thus, monetary policies have dynamic changes globally but in African countries in the 1980s and 1990s where there was a conscious ding author. dresses: pquartey@ug.edu.gh (P. Quartey), upsa.edu.gh (G. Afful-Mensah). nder responsibility of Africagrowth Institute. 2014 Africagrowth Institute. Production and hosting by Elsevier rg/10.1016/j.rdf.2014.07.001 and Sowa, 1997). For instance, before the start of financial sector reforms in 1992, the Bank of Ghana (BoG) operated a system of managing the amount of money in the economy by using direct controls and a fixed exchange rate system. While this approach was relatively easy to implement and also appealed to the gov- ernment (which was mainly interested in channelling resources to certain “priority sectors” of the economy), there were several inefficiencies associated with its ability to give the right signals for allocating resources efficiently. As the reforms began, this system was abolished in favour of a relatively more market- based form of distributing and managing resources. Under the market-based system, the aim was to use indirect instruments to regulate money supply in order to achieve price stability and other economic objectives. This approach was based on the strong conviction that inflation in Ghana was solely or predomi- nantly a monetary phenomenon, following the monetarist school 1 This was made up of interest controls, credit and sectoral credit controls and reserve requirements. Such policies contributed massively to financial repression in Ghana before the financial reforms in 1992. ss under CC BY-NC-ND license.a Department of Economics, University of G b University of Professional Studies, y has reviewed recent monetary and financial policies pursued in Gha improvements in the key monetary indicators which suggest relative balance in the country has limited these outcomes. There is clearly th ve their intended purposes in the presence of fiscal imbalances. Moreov s, this has not reflected in the lending rates charged by deposit money b in the country and therefore the need for policy intervention to make cagrowth Institute. Production and hosting by Elsevier B.V. tion: F31; G21; G28 nancial policy; Monetary policy; Ghana ction ry policies all over the world have been pursued th fiscal policies to ensure that economic progress is move a policy. marke hardly Open accesMensah b , Legon, Ghana , Ghana he paper concludes that generally, while there have been ective monetary policies during the period under review, d for greater fiscal discipline given that monetary policies though the policy rates have signalled a downward trend in (DMBs). This suggests that there are other factors driving ost of doing business favourable to the private sector. from the direct control measures to indirect monetary ever, due to the absence and illiquidity of financial ch as secondary bill markets, many countries were loying indirect monetary control instruments such as er CC BY-NC-ND license. 116 P. Quartey, G. Afful-Mensah / Review of Development Finance 4 (2014) 115–125 of thought. Within this monetary policy framework, reserve money served as an operating target, money supply (M2+) as the intermediate target, with the final target being inflation. Globally, as economies developed, with corresponding devel- opments in the financial sector, several substitutes for money emerged, w tive, particu other coun and adopte etary policy considers t cating in th “The Ba and pric control enactme nationa The Ban price stabi exchange r notes that a tion polici inflation ta icy framew a specific central ban involve the as is typica Abradu-Ot Howeve this “inflati 2002; its o paper there policies be instituted. monetary p The rest of the moneta term devel the moneta The final se 2. Develop 2.1. Banki Ghana’s in other co developed used by pr tion progra 2 The Bank sue sound mo enabling envi This led to significant losses for the banks in terms of the ratio of bad loans to their total portfolio. As part of measures to restruc- ture the banking sector, reforms were instituted (including a market for securities) to ensure effective monetary policy. As a result, a weekly auction in Treasury bills was introduced in 1986. al attempts were subsequently made by the central bank e away from the direct control regime3 to the indirect of policy measures which was more market-oriented. en the negative consequences from the repressive mea- the Financial Sector Adjustment Programmes (FINSAP introduced between 1988 and 1990 to, inter alia, restruc- stressed banks, increase the mobilization of savings and ncy in credit allocation, and develop money and capi- urities markets (Gockel et al., 1997). Subsequently, the ment amended the existing banking law in August 1989 r to strengthen the banking system. Under this new law, were required to keep 6 percent of their net assets as their um capital base even though the Bank of Ghana had the ion t tire b o im nkin 199 INSA ank part new theni nk o 001 n wh d th as aim Bank ll wa coun me r 20 perio the 1 rates ank t re we n 196 nellin was vaila nd Ha majo ank n 198 SAP 2 t state ons. Gock new l ques hich rendered monetary targeting not very effec- larly in the short run. Eventually, Ghana, along with tries, abandoned the monetary targeting framework d inflation targeting as a strategy for conducting mon- . In Ghana, the Bank of Ghana Act 2002 specifically he BoG as an inflation-targeting central bank by indi- e BOG Act 617, Section 33(2) that: nk, in counteracting unusual movements in the money es in the country, shall use any of the instruments of conferred upon it under this Act or under any other nt to maintain and promote a balanced growth of the l economy” k of Ghana has since 2002 mimicked the policy of lity,2 particularly; low inflation and a fairly stable ate (Sowa and Abradu-Otoo, 2007). Quartey (2010) lthough the central bank has been pursuing low infla- es as of 2002 albeit it does not follow an explicit rgeting framework. However, the low inflation pol- ork mimics an inflation targeting regime in which level of inflation is set and targeted jointly by the k and the Ministry of Finance, but the target does not usual modelling and minimizing of the loss functions lly done under inflation targeting regimes (Sowa and oo, 2007). r, one thing that is very evident is that although on targeting” framework has been operational since utcome has not received much interrogation. This fore reviews recent trends in financial and monetary fore and after the inflation targeting framework was Specifically, the paper analyze the current trends in olicies and movements in some of the key indicators. the sections are as follows: The next section discusses ry policy options pursued under the various medium- opment strategies. The subsequent section reviews ry policy outcomes after the financial sector reforms. ction provides the concluding remarks. ments in the monetary and financial sector ng laws and regulations banking sector appears vibrant compared to those untries of the sub-region. Despite the relatively well- and structured banking system, the sector was widely evious governments in their massive, state interven- mmes, particularly between the 1960s and 1970s. of Ghana’s mission statement declares that, “Our mission is to pur- netary and financial policies aimed at price stability and create an ronment for sustainable economic growth”. See www.bog.gov.gh/. Gradu to mov system Giv sures, 1) was ture di efficie tal/sec govern in orde banks minim discret the en bank t new ba period 1 in F Non-B As ber of streng the Ba 2000/2 gic Pla Bill an Bill w by the tem Bi of the cuss so the yea 3 The cially in interest central b try. The (betwee by chan icy used not the a (Khan a Another by the B (betwee 4 FIN 1, dives instituti 5 See 6 The and Cheo increase the ratio for any specific bank or even for anking sector. Among the measures of the central prove its supervisory and regulatory framework, the g law also introduced limits to single borrowers. The 0/91 then witnessed the modified version of FINSAP P 2.4 This was followed by the enactment of the Financial Institutions Law of 1993.5 of the liberalization process in the sector, a num- laws6 aimed at facilitating financial transactions, ng and deepening the financial system in general and f Ghana in particular, were laid before Parliament in . The implementation of the Financial Sector Strate- ich began in 2003 led to the passage of the Banking e Payments System Bill in 2003. While the Banking ed at providing an effective supervision framework of Ghana for the banking industry, the Payment Sys- s aimed at modernizing and improving the efficiency try’s payment system. The following paragraphs dis- of the new developments in the financial sector since 00. d witnessed the use of unorthodox monetary policy measures espe- 970s and early 1980s. Examples of such policies included low (minimum deposit rates and maximum lending rates) set by the o serve as incentives in order to increase investment in the coun- re also bank-specific credit ceilings and sectoral credit controls 0 and 1990) purposively to promote a specific investment pattern g funds into certain “priority sectors”. The low interest rate pol- based on the underlying assumption that the cost of capital and bility of loanable funds were the major determinant of investment san, 1998) and hindrance of access to funds by potential investors. r policy instrument was the imposition of a required reserve ratio of Ghana averaging about 50 percent (by 1983) and 32 percent 7 and 1989). was meant, inter alia, to finish any unfinished project in FINSAP -owned banks and promote and strengthen the non-bank financial el et al. (1997). aws included the Banking Law, the Bank of Ghana Law, the Bills Bill and the Payment Systems Bill. P. Quartey, G. Afful-Mensah / Review of Development Finance 4 (2014) 115–125 117 2.2. Developments in the financial sector since 2000 2.2.1. Univ The Ban sal banking for banks and/or mer licenses. Th in providin do so at th bank’s own relatively h 2.2.2. Paym 2.2.2.1. Re the introdu (RTGS) in based. Giv loads of mo tunity costs for investm financial in order to tra by providin as cheques holdings. T payment m orders for p creating “a timely paym 2007). In a based credi of low-valu 2.2.2.2. Na making the ZWICH wa was to estab in the coun switches to E-ZWICH mated telle transaction (Bank of G in places w do transact technology card, was in a small perc features of withdrawal debit cards the smart ca action cost safe and sim had increas 2.2.2.3. The Cheque Codeline Clearing System. In order to up th ced que f the rsom 3–8 The cur igh cy ar m of ssur lties one 07. renc eros led. ot m piric min itizen igh r took both ing st A ecem ation this n un acce ban lled a pes The ong y, th n Ex hang ener ansfe betw al b Fore tions this orde ontr al, g eign s of hol e grersal banking k of Ghana in 2003 introduced the concept of univer- into the country. Universal banking made it possible to undertake commercial, development, investment chant banking without necessarily having separate us, universal banking was to make the banks versatile g services to their customers. However, such banks eir own risk since it is dependent on the respective capital resources given that such expansion requires uge resources. ent System Bill al Time Gross Settlement System (RTGS). Before ction of the Real Time Gross Settlement System 2006, Ghana’s economy was predominantly cash- en the high transaction costs (in terms of carrying ney for various transaction purposes) and the oppor- (with respect to serving as potential source of funds ent purposes if such funds were deposited in the stitutions), it was crucial for policy intervention in nsform the economy into an eventual cashless one g relatively more efficient payment methods – such and electronic cards – that would lead to less cash he introduction of the RTGS for high-value interbank inimized payments and settlement risks, given that ayments were executed almost immediately, thereby n enabling environment for safe, sound, secure and ents” (Bank of Ghana Consultation Paper, October, ddition, the Bank of Ghana also introduced a paper- t clearing system in 2007 to facilitate the settlement e payments. tional Switch (E-ZWICH) Programme. In line with economy cashless, a National Switch known as the E- s introduced in 2008. The purpose of the E-ZWICH lish a common platform for all payment transactions try and also allow banks which did not have platform join that common platform at very low cost. “The was also to allow the interoperability of all auto- r machines (ATMs) and the settlement of payments s by customers to different banks at Point of Sale” hana, 2007). With this national switch, subscribers ith telecommunication network coverage are able to ions online through Universal Electronic Payments . In addition, the E-ZWICH card, a biometric smart- troduced in 2009 to help solve the problem that only entage of the population uses debit cards. The unique this smartcard made it possible for cash deposits and s, transfer of e-money, point-of-sale purchases, bank , loading and withdrawal of wages and salaries. Hence rd was seen to be efficient given that it had low trans- s, limited infrastructure needs, and was convenient, ple. By the end of 2010, the number of card holders ed by about 48.9 percent (Bank of Ghana, 2010). speed introdu the che parts o cumbe initial 2.2.3. The very h curren the for the pre difficu major July 20 the cur some z cancel does n Em redeno their c have h Ghana tive to was do the We and D nomin During culatio longer central was ca “Ghan 2.2.4. Am countr Foreig the exc were g and tr tracted approv of the restric Under ized in loans c approv all for feature foreign and the cheque clearing system, the Bank of Ghana in 2009 the Cheque Codeline Clearing (CCC) in Accra with truncation system and this was later extended to other country. This made the cheque clearing process less e by reducing the clearing cycle to 2 days from the days nationwide (Bank of Ghana, 2010). currency redenomination rency regime came with high transaction costs and risks due to the need to carrying huge amounts of ound for daily transactions. Other burdens were in maintaining bookkeeping and statistical records and e on the payment system, especially the ATMs. Such necessitated interventions by the central bank. The was the redenomination of the cedi by the BoG in Currency redenomination is the process of changing y value on a financial security or simply “striking out ” from a currency. In Ghana’s case, four zeros were It is important to note that currency redenomination ean loss of value of the currency in question. ally, there is evidence that many countries embark on ation at the end of a stabilization period to signal to s and investors that the country is no longer going to ates of inflation. Therefore, it was not surprising that this step in order to make the economy more attrac- local and foreign investors and also because Ghana its best to achieve the convergence criteria set by frican Monetary Zone (WAMZ). Between July 2007 ber 2007, the Bank of Ghana carried out the rede- , exchanging the old ¢10,000 for the new GH¢1.00. period, both the old and new currencies were in cir- til January 1, 2008 when the old currency was no pted as legal tender and could only be changed at the k or the commercial banks. While the new currency the “Ghana cedi” (GH¢), its sub-unit was called the ewa” (Gp). Foreign Exchange Act (Act 723) the measures to deepen the financial system in the e Exchange Control Act, 1961 was replaced by the change Act (Act 723) in December 2006. During e control regime, foreign transactions in the country ally limited, with restrictions placed on the issuance r of securities in addition to external loans con- een residents and non-residents (such loans required y the Bank of Ghana). Therefore, the introduction ign Exchange Act was to ensure a shift from these to a more liberalized foreign exchange regime. new Act, the inflow of foreign exchange was liberal- r to encourage foreign direct investment. In addition, acted by residents no longer required Bank of Ghana iven that banks were required to submit reports on exchange transactions to the Bank of Ghana. Other the new Act included the removal of restriction on dings of equities listed on the Ghana Stock Exchange, anting of permission to non-residents to invest in 118 P. Quartey, G. Afful-Mensah / Review of Development Finance 4 (2014) 115–125 money market instruments of a tenor of at least three years (Bank of Ghana, 2 2.2.5. Min financial in The libe had negativ though the Ghana’s fin Ghana by eign direct there was t duction of required fi accepted st up of so m base and d could mak conditions had to be so industry in new opport Hence, t non-bank fi cally, the m from GH¢7 lion. The c finance hou lion, to betw the new mi banks and talization p guarantee t dealership to meet the opportunity remaining requiremen and NBFIs ing with a years from In recen diversified ingly innov banking se suggesting should be a as a vehicle finance and 2.3. Devel institutions The rest creation of foreign exc market7 benefited the most. Liberalization of the financial sec- reased competition, especially in the banking industry. introduced best practices in the business environment, logy, product and risk management systems. The banking ry in ercia red) ontin n, tw curi espe nd c hich ’s to e sp shed at w n in was n th ntry bank rodu ban cally ared sines thei rd C f cu . Als an ial se any to en d in the s) ha e wi ship and l Re untry eme g, an num amp cemb sion the me both nd 1 mone t hous007). imum paid-up capital of banks and non-bank stitutions (NBFIs) ralization agenda of the various policy reforms also e consequences on the economy. For instance, even Foreign Exchange Act objective of better integrating ancial system with the rest of the world benefited opening up new opportunities by encouraging for- investment, it was not without risks or costs. Hence he need for banks to hedge. For example, the intro- the RTGS and the Cheque Codeline Clearing System nancial institutions to keep up with internationally andards. Meanwhile, the banking sector was made any banks in the lower tier without enough capital epth to support significant levels of lending, which e them vulnerable to unfavourable macroeconomic and external shocks. For this and other reasons, there me adjustments in entry conditions into the banking order to strengthen their capital base to support the unities emerging from globalization. he minimum capital requirements for both banks and nancial institutions (NBFIs) were revised. Specifi- inimum capital requirement for banks was increased million to between GH¢ 50 million and GH¢60 mil- apital requirements for depositing-taking NBFIs and ses increased from GH¢1.0 million and GH¢1.5 mil- een GH¢ 5 million and GH¢8 million. Even though nimum capital requirement was announced in 2007, deposit-taking NBFIs were expected to submit capi- lans to the BoG by the end of June 2008 in order to hem continued access to the settlement and primary system. By December 2008, institutions that failed new minimum capital requirement were denied the of participating in the settlement system and the banks which were unable to meet the new capital t were placed on the lower tier. Meanwhile, banks granted licenses six months earlier and those operat- provisional license were given a grace period of two the date of operation to meet this new requirement. t years, the financial system has become relatively with regard to the range of services and the increas- ative products and services that are introduced. The ctor continues to be very important for businesses, that the subsequent thrust of financial market policy imed at developing a vibrant capital market to serve for raising funds to support large amounts of equity investment. opments in banking and non-banking financial ructuring of the financial sector in Ghana led to the the financial market, made up of the bond, equity, hange and derivative markets. However, the money tor inc It also techno indust comm Charte and C additio and Se 1991 r rural a chy, w system gramm establi nies th positio 1990s Eve the cou in the the int foreign Specifi was ge the Bu access Standa ment o ATMs placed financ with m order allowe At (DMB and on owner owned Annua the co ing the bankin in the For ex by De conclu ing in that so cases, 1998 a 7 The discounthe early 1990s was made up of the central bank, three l banks (Ghana Commercial, Barclays and Standard , three merchant banks (Merchant, Ecobank Ghana ental Acceptances) and seven secondary banks. In o discount houses (Consolidated Discount House ties Discount House) were established in 1987 and ctively. In the same period, there were almost 100 ommunity banks (RCBs) at the bottom of the hierar- accounted for only about 5 percent of the banking tal assets. As part of the financial adjustment pro- ecified in the ERP in 1983, the government in 1991 the first Finance Company in order to help compa- ere distressed but potentially viable to regain their the system. Hence, the financial sector in the early relatively active. ough between 1997 and 2001 the number of banks in remained at 17, there were interesting developments ing sector. For instance, in 1997 the sector witnessed ction of new products or services by the two oldest ks in the country, Barclays and Standard Chartered. , Barclays Bank introduced the Akuafo Bond (which towards improving the saving habit of farmers) and s Master (a system that enabled large companies to r bank accounts by logging into the bank’s system). hartered Bank launched a new service whereby pay- stomers’ utility bills could be effected through their o, with effect from August 1998, the Bank of Ghana embargo on the licensing of new entrants into the ctor in view of the fact that the bank was dealing applications which required proper examination in sure that only those who met the criteria would be the sector. end of 2010, the number of deposit money banks d risen to 26, made up of 25 Class 1 banking licenses th a general banking license. Out of the total DMBs, was evenly distributed – 13 of them were Ghanaian the remaining 13 foreign owned (Bank of Ghana port, 2010). By January 2013, there were 29 banks in with both Ghanaian and foreign ownership includ- rgence of some Nigerian Banks. With regard to rural assessment of the trend reveals a gradual increase ber, although there was both exit and entry of RCBs. le in 1997, there were 132 RCBs in the country but er 2012, the number was 133. In this case, a quick of only one entry into rural and community bank- country within the period may be misleading given years recorded new entry or exit or even in some . Another finding worth noting is the fact that between 999, the sector witnessed 22 exits from the rural and y market in Ghana is made up of the central bank, brokers or es, corporate and other financial institutions. P. Quartey, G. Afful-Mensah / Review of Development Finance 4 (2014) 115–125 119 Table 1 Composition Type of institu 1. Finance ho 2. Savings an 3. Leasing co 4. Discount h 5. Building so 6. Venture cap 7. Mortgage fi Total Source: Comp Report. Table 2 Composition Type of institu 1. Finance ho 2. Credit refer 3. Savings an 4. Leasing 5. Finance an 6. Mortgage fi Total Source: Bank community characteriz banking in urban areas Meanwh bank financ close to do of NBFIs b emphasize deepening, intermedia units in the 3. Trends 3.1. Inflati The Cen centred on a public an jointly set and the Ba spelt out in parency is process and as democra pendence. monetary p the prime o rate to the t rates in Ghana, 1997–2012 (%). Rate 20.8 15.7 13.8 40.5 21.3 15.2 31.3 16.4 14.8 10.5 12.8 18.1 Ghan oint nk a s. Ta revie ng fr com tive eral ffect ntial ly be siderof non-bank financial institutions as of 1997. tion Number use 13 d loan 7 mpanies 6 ouses 3 cieties 2 ital 1 nancing 1 33 iled from various issues of the State of the Ghanaian Economy of non-bank financial institutions as of 2012. tion Number use 25 ence bureau 3 d loans 19 2 d leasing 3 nancing 1 53 of Ghana. banking. The other periods, however, were mostly ed by either one or two entries or exits. However, Ghana has become an urban phenomenon, with most flooded with banks (including rural banks). ile, there has also been a remarkable increase in non- Table 3 Inflation Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: A p tral ba proces under targeti far by respec Gen very e substa ticular be conial institutions (NBFIs) since 1997 with their number ubling by 2012. Tables 1 and 2 present the structure etween 1997 and 2012 respectively. It is important to that this growth plays a significant role in financial given that such institutions also help in the financial tion process between the surplus and deficit spending economy. in monetary indicators (post-1997) on tral Bank’s choice of inflation targeting, which is the fiscal framework of the government, involves nouncement of a specific rate of inflation which is by the Ministry of Finance and Economic Planning nk of Ghana. This targeted rate of inflation is clearly the annual budget. In this new framework, trans- very important since it promotes credibility of the of the Central Bank. Again, transparency is regarded tic accountability to the public, in exchange for inde- Given this targeted inflation rate for the year, the olicy committee (MPC) of the Bank of Ghana uses r policy rate as a major tool in driving the inflation argeted rate. between 20 both years) respectivel off with thi Followi rate (from Ghana Sha aimed to ti sustain sing In the proc ponent of GSGDA’s t erage comp 0.00 10.00 20.00 30.00 40.00 50.00 60.00 19 97 P e r c e n t a g e Source: Comp16.0 8.6 8.6 8.8 a Statistical Service. worth noting in this new framework is that the cen- lso invariably targets the monetary aggregate in the ble 3 shows the rates of inflation during the period w while Fig. 1 shows the effectiveness of the inflation amework used by the MPC of the Bank of Ghana so paring target rates to the actual rates achieved for the year. ly, while the inflation targeting framework was not ive in its early days of implementation – there was a difference between the target and actual rates (par- tween 2003 and 2005 and from 2007 to 2009) – it can ed as very effective since 2010. It is worth noting that 10 and 2011, the actual inflation rates (8.6 percent in were below the target rates (9.2 and 9.0 percentages y). On the whole, it looks like the economy is better s new framework. ng the 5.3 percentage point increase in the inflation 12.8 percent in 2007 to 18.1 percent in 2008), the red Growth and Development Agenda (GSGDA) ghten both monetary and fiscal policies in order to le-digit inflation (8.6 percent) rate achieved in 2010. ess, the framework sought to improve the food com- the consumer price index (CPI). To this point, the arget with regard to the food and non-alcoholic bev- onent of the CPI has been attained and sustained, 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 Growth Rate iled from various issues of ISSER, State of the Ghanaian Economy Report Fig. 1. Growth in M2+, 1997–2012. 120 P. Quartey, G. Afful-Mensah / Review of Development Finance 4 (2014) 115–125 Table 4 Headline infla Month Ye Co 2010 Jan 19 Feb 18 Mar 17 Apr 17 May 16 Jun 15 Jul 16 Aug 14 Sept 13 Oct 12 Nov 11 Dec 10 2011 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec 2012 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Source: Ghan according t nent record reviews the Progres of the CPI below 5 pe cent) in ter significant achieved in ther reduct January 20 However, t non-alcoho One crit optimal or that the grotion rates, 2010–2012 (%). Inflation over 12 months Combined Food and beverages Non-food 14.78 9.08 18.79 14.23 8.17 18.54 13.32 7.35 17.55 11.66 5.81 15.82 10.68 4.69 14.98 9.52 6.13 11.89 9.46 5.84 11.96 9.44 5.33 12.25 9.38 5.67 11.84 9.38 5.62 11.82 9.08 5.32 11.50 8.58 4.50 11.22 9.08 4.84 11.82 10 9.16 4.59 12.12 9 9.13 4.70 12.00 9 9.02 4.18 12.16 9 8.90 3.93 12.15 9 8.59 2.78 12.44 9 8.39 3.25 11.76 9 8.41 3.79 11.38 9 8.40 3.74 11.30 8 8.56 4.03 11.32 9 8.55 4.41 11.08 8 8.58 4.27 11.21 8 8.70 4.50 11.30 8 8.60 4.30 11.20 8 8.80 4.40 11.40 8 9.10 4.80 11.70 8 9.30 5.00 11.90 8 9.40 5.40 11.90 8 9.50 5.50 12.00 8 9.50 4.40 12.50 8 9.40 4.40 12.40 8 9.20 4.10 12.20 9 9.30 3.90 12.40 9 8.80 3.90 11.60 9 a Statistical Service. o the available data since 2010. That is, the compo- ed less than 10 percent yearly inflation rates. Table 4 headline inflation rates from 2010 to 2012. s in the food and non-alcoholic beverage component was remarkable during 2011, with rates generally rcent and the worst performance (of about 4.84 per- ms of rate of increase recorded in January 2011. This progress led to the single-digit inflation rate target the preceding year being sustained. There was a fur- ion in the inflation rate from about 9.08 percent in 11 to about 8.58 percent in December the same year. he lowest yearly rate (2.78 percent) in the food and lic beverage component was recorded in June 2011. ical issue worth raising here is what rate of inflation is growth maximizing for Ghana. Quartey (2010) found wth maximizing rate of inflation for Ghana is not a single digi of achievin fully taking outcomes. 3.2. Excha The US preferred fo wealth in t the cedi wa more worr cially the h institutions rencies. It a more stablearly inflation (average) mbined Food and beverages Non-food .64 15.16 22.88 .78 14.16 22.10 .66 12.98 21.02 .46 12.25 21.19 .82 11.47 20.63 .76 10.61 19.41 .05 9.84 20.42 .64 8.63 18.85 .47 7.82 17.40 .46 7.05 16.21 .29 6.73 14.65 .71 6.13 14.01.26 5.77 13.43 .56 5.47 12.90 .53 5.25 12.44 .32 5.12 12.13 .17 5.05 11.89 .09 4.78 11.94 .57 4.56 11.92 .29 4.43 11.85 .83 4.27 11.81 .17 4.14 11.76 .93 4.06 11.73 .73 4.04 11.73 .73 4.08 11.70 .69 4.40 11.65 .66 4.20 11.59 .66 4.03 11.57 .68 4.90 11.55 .72 4.21 11.53 .79 4.41 11.50 .88 4.50 11.55 .95 4.55 11.63 .01 4.58 11.70 .07 4.57 11.78 .09 4.53 11.82 t and therefore suggest that the government policy g single digit inflation should be considered care- into consideration inflation thresholds and growth nge rate dollar, pound sterling and the euro continued to be the reign currencies, with some Ghanaians storing their hem in order to maintain income values, given that s believed to perform poorly as a store of value. Even ying is the fact that most economic activities (espe- ospitality industry, real estate companies, educational and trading firms) quote their prices in foreign cur- ppears that over the years, the cedi has been relatively in relation to the US dollar. On the other hand, the P. Quartey, G. Afful-Mensah / Review of Development Finance 4 (2014) 115–125 121 Table 5 Cumulative percentage change in the cedi and selected major currencies (using interbank exchange rates). Year ¢/$ ¢/£ ¢/D 2002 14.05 21.86 25.60 2003 4.78 14.02 23.93 2004 2.21 12.51 10.86 2005 0.87 −10.67 −13.33 2006 1.14 14.14 11.37 2007 5.40 7.00 18.80 2008 7.70 3.40 12.4 2009 16.64 25.25 18.10 2010 3.15 6.57 −4.35 2011 5.10 9.63 8.73 2012 7.21 20.74 16.43 Source: Compiled from various issues of Bank of Ghana Statistical Bulletin. cumulative depreciation of the cedi against the major foreign currencies shows that the cedi’s performance has generally been weak against the pound sterling. Between 2002 and 2012, the cedi record depreciatio same time percent and It is wor remained r cies (Table decline in t the same pe The subseq in the local particularly less, the de attributed t elections an Recentl been attribu exchange m structures in Ghana, especially the huge budget deficit recorded since the 2012 elections and the associated decline in investor confidence. As at 2013, the exchange rate to the dollar was GHs1.9085 and GHs 3.096 to the pound. As at 30th December, the exchange rate was GHs2.37 and GHs3.88 to a dollar and the Pound respectively. As at 28th February 2014, the dollar and the pound exchanged for GHs2.57 and GHs4.26. The Cedi declined by 23 percent in 2013, thereby making it Africa’s worst performer after the South African Rand. To reiterate, the main cause has been the excess spending in the election year, the dol- larization in the Ghanaian markets causing high demand for the dollar amongst others like low confidence in the cedi, high trade deficits, foreign loan payments and the excessive use of cash for foreign transactions. The bank of Ghana in order to control the further decline in the currency has released a total of $60 million onto the market for use by banks whose customers want them for foreign transactions in addition to enforcing stricter exchange control regulations (see Bank of Ghana Notice No. BG/GOV/SEC/2014/01). Laudable as these policies were in sing duca ign . Inte ina n ra very iven finan ave h were onsi ile th s o able Table 6 Interest rate s Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Comped its best performance in 2005 with a cumulative n of less than 1 percent against the dollar while at the appreciated against the pound and the euro (by 10.67 13.33 percent respectively). th noting that over the period 2003 and 2005, the cedi elatively stable against all the major foreign curren- 5). This may probably be as a result of the continuous he rate of inflation and nominal interest rates within riod, which helped to increase confidence in the cedi. uent effect is an increase in demand for investments currency. There was further appreciation of the cedi during the last quarter of 2009 into 2010. Neverthe- preciation in early 2009 was significant and can be o the high budget deficit recorded during the 2008 d its repercussions on the economy thereafter. y, the Cedi has been quite unstable and this has partly ted to the slowdown in the global economy (foreign arket pressures) and also weakness in the internal addres little e of fore higher 3.2.1. Nom inflatio been a rates. G in the may h period were c Wh in term as loan tructure, 1997–2012 (%). Nominal saving rate Nominal lending rate Prime/policy rate In 27.68 44.22 45.00 20 16.50 38.50 37.00 15 10.50 36.50 27.00 13 18.00 47.00 27.00 40 14.50 43.75 27.00 21 11.13 36.36 24.50 15 9.75 32.75 21.50 31 9.50 28.75 18.50 16 6.38 26.00 15.50 14 4.75 24.25 12.50 10 4.75 24.17 13.50 12 5.18 27.25 17.00 18 10.00 32.75 18.00 16 5.88 27.63 13.50 8 4.05 25.93 12.50 8 5.25 25.72 15.00 8 iled from various Bank of Ghana Statistical Bulletins. the instability on the exchange market, there has been tion on the policy and this rather led to ‘panic buying’ currency thereby making the black market premium rest rates l interest rates have generally followed the trend of tes. It appears that the central bank’s policy rate has effective instrument for bringing down the inflation that the Bank of Ghana did not necessarily interfere cial market to fix the lending and savings rates (as appened in the past), real savings rates within this consistently negative; meanwhile, real lending rates stently positive. e non-interference may seem good, its repercussions f discouraging savings, which are needed to serve funds to enhance investment activities, may raise a flation rate Real savings rate Real lending rate .80 6.88 23.42 .70 0.80 22.80 .80 −3.30 22.70 .50 −22.50 6.50 .30 −6.80 22.45 .20 −4.07 21.16 .30 −21.55 1.45 .40 −6.90 12.35 .80 −8.42 11.20 .50 −5.75 13.75 .80 −8.05 11.37 .10 −12.92 9.15 .00 −6.00 16.75 .60 −2.72 19.03 .60 −4.55 17.33 .80 −3.55 16.92 122 P. Quartey, G. Afful-Mensah / Review of Development Finance 4 (2014) 115–125 Table 7 Interest margi Year Nom rate 1997 27.6 1998 16.5 1999 10.5 2000 18.0 2001 14.5 2002 11.1 2003 9.7 2004 9.5 2005 6.3 2006 4.7 2007 4.7 2008 5.1 2009 1.0 2010 5.8 2011 4.0 2012 5.2 Source: Comp policy con rate has bee widening th does the n units to ma through the rate may be While T review per or spread. Given th interest rate this direct 2003, desp nal saving though the declined by 2006 to 24 the nomina ever, in re improved, only result the savings between 20 nominal in and 2009, rate almos increased ( declines ev rates remai spread betw 20 percent margin obv surprising Many Gha allocation of DMB credit, 1997–2001 (%). 1997 1998 1999 2000 2001 ture cturin ction Comp ies, a king redi the w eme is is ing se in l be last e tic p In 19 ut s P (T lima y. A was ector strun spread, 1997–2012 (%). inal savings Nominal lending rate Interest margin/ spread 8 44.22 16.54 0 38.50 22.00 0 36.50 26.00 0 47.00 29.00 0 43.75 29.25 3 36.36 25.23 5 32.75 23.00 0 28.75 19.25 8 26.00 19.62 5 24.25 19.50 5 24.17 19.42 8 27.25 22.07 0 32.75 31.75 8 27.63 21.75 5 25.93 21.88 5 25.72 20.47 iled from various Bank of Ghana Statistical Bulletins. cern. For instance, on average, the nominal lending n almost four times the nominal savings rate thereby e spread between these two rates (Table 7). How then egative real savings rate motivate surplus spending ke their funds available for the deficit spending units financial intermediaries? Thus, negative real savings seen as a disincentive to financial intermediation. able 6 shows the trend in interest rates during the iod, Table 7 further looks at the interest rate margin e generally direct relationship between inflation and s, it was quite puzzling to note that in some periods, association did not exist. Thus, between 2002 and ite the increase in the rate of inflation, both nomi- Table 8 Selected Sector Agricul Manufa Mining Constru Others Total Source: Report. activit the ban 3.3. C On improv tor. Th enhanc increa gradua in the domes ment. GDP b the GD ment c econom credit 3.4. S Theand lending rates declined. In another instance, even rate of inflation increased, the nominal lending rate about 0.08 percentage point (from 24.25 percent in .17 percent in 2007). Meanwhile in the same period, l interest rate on savings remained unchanged. How- cent times, although inflation rates have generally particularly since 2004, these improvements have ed in marginal changes in interest rates (especially rate). Thus, the successive declines in inflation rates 04 and 2007 translated into consistent declines in terest rates. Then during the period between 2008 despite the decline in the inflation rate, the savings t doubled; at the same time, the lending rate also Table 7). However, interest rates recorded marginal en though the spread between lending and deposit ned higher in 2011 than in 2010. It appears that the een the lending and saving rates averaged at least for the period under review (Table 7). Such a huge iously does not encourage savings and so it is not that most Ghanaians do not have the habit of saving. naians, especially those engaged in informal sector has not cha that have e are: manuf contrast, th mainstay8 attention fr period of t manufactur between 19 DMB cred more credi Table 9 to domesti Also, the n this period An assessm firms this a about one q 8 The sector and foreign re12.00 12.20 11.80 9.60 9.60 g 22.80 24.60 24.90 28.10 19.30 5.10 5.00 5.80 5.50 4.00 10.10 11.20 8.90 6.80 6.80 50.00 47.00 48.60 50.00 60.30 100.00 100.00 100.00 100.00 100.00 iled from various issues of ISSER, State of the Ghanaian Economy re more comfortable keeping their money outside sector. t to the private sector hole, the period under review witnessed consistent nts in terms of total DMB credit to the private sec- in line with the macroeconomic policy objective of private sector competitiveness. Despite the consistent credit to the private sector, the rate of growth was very tween 1997 and 2004 compared to the growth rates ight years. Comparing private sector credit to gross roduct (GDP), there has been significant improve- 97, private sector credit was only about 8 percent of ince 2007, such credit has been more than a fifth of able 8). This also suggests a relatively good invest- te and increased opportunities being created in the t the end of the third quarter in 2012, private sector about 40 percent of GDP. al credit allocations by the DMBs cture of credit allocation by the deposit money banks nged very much. Tables 8 and 9 show that the areas njoyed greater proportions of DMB credit in Ghana acturing, domestic trade and the services sectors. In e agricultural sector, which is considered to be the of the Ghanaian economy – has not received much om the DMBs. It is worrying that within the 15-year his study, the trend remains almost the same. The ing sector received the highest share of DMB credit 97 and 2004, receiving on average 20 percent of total it. Between 2005 and 2010, domestic trade received t from the DMBs (Table 8). shows that the average percentage of DMB credit c trade between 2005 and 2010 was about 23.78. ew weight of the services sector is evident within –it was the second highest recipient of DMB credit. ent of DMB credit allocation since 2011 also con- ssertion since the services sector received on average uarter of total credit from the deposit money banks. is very important in terms of its contribution to GDP, employment venue. P. Quartey, G. Afful-Mensah / Review of Development Finance 4 (2014) 115–125 123 Table 9 Sectoral Allocation of Credit by DMBs, 2002–2012 (%).a Sector 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Agriculture 9.40 9.40 7.70 6.70 5.40 4.90 4.30 4.74 6.13 5.74 5.11 Mining 3.80 2.30 2.20 3.70 3.80 4.10 2.90 2.75 2.71 4.26 1.29 Manufacturing 21.10 20.70 21.50 19.10 18.50 15.50 11.90 11.63 13.26 8.95 10.47 Construction 7.80 4.70 6.00 5.70 7.90 7.60 6.80 7.84 7.53 8.04 4.31 Electricity, gas and water 4.90 2.90 2.80 1.80 3.60 3.80 4.00 6.31 6.52 6.68 2.40 Import trade 6.40 7.30 8.10 8.10 6.90 5.30 5.20 5.32 5.78 9.21 8.95 Export trade 2.80 5.00 6.40 1.70 1.30 1.40 1.40 1.70 1.94 1.20 7.80 Domestic trade 12.80 20.40 15.60 22.40 22.60 24.10 26.20 24.10 23.25 16.27 16.75 Transport, storage and communications 4.00 4.40 2.10 4.00 3.10 3.10 2.90 3.99 4.02 4.19 9.50 Services 11.30 8.80 11.30 14.70 18.40 21.30 23.90 20.97 20.64 26.82 24.94 Others 13.30 11.30 11.40 11.00 7.60 8.00 9.60 9.99 7.74 8.10 8.17 Cocoa marketing 2.30 2.90 5.00 1.00 0.80 0.80 1.00 0.68 0.49 0.54 0.31 Total 99.90 100.10 100.10 99.90 99.90 99.90 100.10 100.02 100.01 100.00 100.00 Source: Compiled from various issues of ISSER, State of the Ghanaian Economy Report. a The presentation of the sectoral allocation of credit by the DMBs is based on the BoG’s modifications for the groupings. 3.5. Financial deepening Financial deepening, which is also known as financial expan- sion, has usually been defined in terms of the development of the financi refers to th economy. extent to w needs of a a very criti any econom opportuniti used to me supply to G supply rati share of G cial deepen rather leads believe that financial development has a significant impact on economic growth. The proponents of the “demand-leading” theory believe that as the economy grows and there is techno- logical expansion, productive processes require extra financial ces a anwh he “ abo ed th por grow n ra cris sign ing eans houl Table 10 Financial dee Year N M2+ (GH 1997 1998 1999 2000 2001 1 2002 1 2003 2 2004 2 2005 3 2006 4 2007 5 2008 8 2009 10 2010 13 2011 18 2012 22 Source: Calcual sector (particularly the banking sector) and this e increase in provision of financial services to an In other words, financial deepening measures the hich financial institutions are able to satisfy the society through financial intermediation. This plays cal role in the growth and development process of y, given that the more liquid money is, the more es there are for sustained growth. Common indicators asure financial expansion include the ratio of money DP (M2/GDP or M2+/GDP), the currency–money o (Cu/M2+) and credit to the private sector as a DP. Despite the disagreement over whether finan- ing produces economic growth or economic growth to financial development, most modern economists resour 1994). Me with t brings accept it is im affect inflatio during not be deepen This m there s pening, 1997–2012. ominal Nominal Currency Private sector Nominal M2+ M1 Cu Credit GDP ¢ mm) (GH¢ mm) (GH¢ mm) (GH¢ mm) (GH¢ mm) 250.60 176.57 98.18 107.00 1386.30 0.18 39.30 207.00 108.36 163.90 1715.70 0.02 489.65 219.25 127.24 246.60 2058.00 0.24 724.81 351.65 263.60 382.60 2715.30 0.27 024.80 512.65 308.99 447.20 3801.40 0.27 536.81 821.80 467.16 586.40 4776.40 0.32 117.39 1137.28 633.78 805.20 6526.20 0.32 666.72 1458.40 730.33 1041.72 7865.00 0.34 041.75 1558.12 803.23 1445.58 9631.90 0.32 230.25 2094.83 1019.60 2064.03 11,490.32 0.37 750.70 2931.20 1302.20 3295.60 13,976.70 0.41 061.20 3801.60 1663.80 4884.30 17,211.70 0.47 ,233.08 4159.63 2084.44 5653.96 21,630.00 0.47 ,775.46 6439.28 2925.85 6776.62 25,934.00 0.53 ,195.19 8714.40 3763.27 8752.36 26,328.00 0.66 ,620.05 11,156.73 4918.73 11,477.37 30,089.90 0.75 lated from various issues of the Bank of Ghana Statistical Bulletin.nd this will induce financial development (Ireland, ile, McKinnon (1973) and Shaw (1973) believe, supply-leading” theory, that financial deepening ut economic development. While it is generally at financial deepening leads to economic growth, tant to emphasize that financial deepening does not th positively when the economy is experiencing high tes. Thus, Rousseau and Wachtel (2009) show that is periods, the benefits of financial deepening may ificant but if the crisis is prevented, then financial will have a significant impact on economic growth. that as the financial system of an economy expands, d be effective financial sector policies and reforms in /GDP M1/GDP Cu/GDP Cu/M2+ PSC/GDP0.13 0.07 0.39 0.08 0.12 0.06 2.76 0.10 0.11 0.06 0.26 0.12 0.13 0.10 0.36 0.14 0.14 0.08 0.30 0.12 0.17 0.10 0.30 0.12 0.17 0.10 0.30 0.12 0.19 0.10 0.27 0.13 0.16 0.08 0.26 0.15 0.18 0.10 0.24 0.18 0.21 0.09 0.23 0.24 0.22 0.09 0.19 0.28 0.19 0.10 0.20 0.26 0.25 0.11 0.21 0.26 0.31 0.14 0.21 0.32 0.37 0.16 0.22 0.38 124 P. Quartey, G. Afful-Mensah / Review of Development Finance 4 (2014) 115–125 order to prevent financial crisis. Table 10 presents the indicators of financia During t to GDP gen only margi has been ve in 1997 to (from 0.18 Cu/M2+ an 4. Conclu This stu cies pursue monetary Monetary p economy to of monetar direct cont recently to of monetar subsequent and domes of medium the long-te status by 2 The stu strategies a ings. First, accompani were also d with huge large-scale private sect 31 percent Thereafter, percent) im in M2+ in growth rate has seen a r cent within with the GS of 2013. S GSGDA an Pension A Act 2008 ( Since 2 financial se them (univ of the curr new minim initiatives non-bankin their numb the financia 33 NBFIs; and 53 NB financial deepening, which is evident in the over 300 percent se in re h ally i Wes f atta he d zzlin g rat nly r eral etar hich iod cipli ed p vern ic en grow cy ra g rat este e rat nd re s an aged ome ng th is sh nce er, W . The al Pap Ghan : Imp tution Ghan A.F., ts: po hana Econo P.N., 1), 47 on, R Instit .H., H lopm M., 20 arch , P., 20 na. M R., So ran A u, P.L Deepe nomic .K., A r. Papl deepening for the review period. he period under review, even though the ratio of M2+ erally recorded an upward trend, the increases were nal, suggesting that the country’s financial expansion ry gradual. However, comparing the M2+/GDP ratio that of 2012, there has been a remarkable increase in 1997 to 0.75 in 2012). On the whole, the Cu/GDP, d PSC/GDP have been very low. sion dy has outlined the monetary and financial poli- d over the past decade as well as the trends in key indicators to ascertain possible inter-relationships. olicies have been pursued in Ghana to reorient the wards the path of growth. Consequently, the conduct y policy in Ghana has moved away from the use of rol measures to indirect, market-oriented tools and inflation targeting. It appears that the main objective y policy in Ghana has been to stabilize prices and ly create an enabling environment for both foreign tic investors. In this regard, there has been a number -term development plans (MTDPs) aimed at turning rm development objective (attaining middle-income 020) into a reality. dy therefore looked at the various monetary policy nd trends in key indicators and made interesting find- given that any effective monetary policy should be ed by fiscal discipline, fiscal policies in the period esigned to ease those monetary difficulties associated budget deficits that compel governments to resort to borrowing at high interest rates, which crowds out the or. Within the period 1996–2000, M2+ grew at about on average and inflation averaged about 22.7 percent. Ghana recorded its highest growth in M2+ (about 50 mediately after joining HIPC in 2002. The growth recent years has slowed down with 2012 recording a of about 24.32 percent. Inflation, on the other hand, emarkable improvement averaging around 14.65 per- the same period. The economy is currently operating GDA which is expected to be completed by the end everal strategies have been implemented under the d key among them are the passage of the National ct 2008 (Act 766) and the Anti-Money Laundering Act 749). 000, there have been a number of initiatives in the ctor of the country. This study discussed some of ersal banking, Payment System Bill, redenomination ency, the Foreign Exchange Act (Act 723) and the um paid-up capital of banks and NBFIs). These have contributed to growth in the banking and g financial subsectors of the economy in terms of ers and innovative products and services. In 1997, l sector of the country was made up of 17 banks and by the end of 2012, this had increased to 29 banks FIs. These developments have also contributed to increa The especi of the teria o given t it is pu lendin until o Gen in mon ual) w the per cal dis intend the go conom within in poli lendin is sugg the bas cient a system encour ment d affecti and th Refere Alexand 1995 sion Bank of omy Insti Bank of Gockel, men for G and Ireland, 84 ( McKinn ings Khan, A deve Ncube, Rese Quartey Gha Roe, A. Saha Roussea cial Eco Sowa, N facto the M2+/GDP ratio between 1997 and 2012. as been steady improvement in the inflation rates, n the last three years, enabling Ghana to achieve one t African Monetary Zone (WAMZ) convergence cri- ining single-digit inflation, albeit, briefly. However, irect relationship between inflation and interest rates, g to note that interest rates are still high, particularly es and that real saving rates were negative from 1999 ecently. ly, while there have been remarkable improvements y indicators (although some of them are very grad- suggest relatively effective monetary policies during under review, there is clearly the need for greater fis- ne given that monetary policies cannot achieve their urposes in the presence of fiscal imbalances. Thus, ment should continue to maintain a stable macroe- vironment that ensures the monetary aggregates are th-optimizing limits. Secondly, despite the decline tes and inflation rates during the period under review, es remain high and this is stifling private business. It d that the new Bank of Ghana formula for computing e of banks is strictly adhered to in order to ensure effi- alistic charges on loans. In addition, proper address d the use of credit reference bureaux should be highly to reduce the high loan default rate. Finally, govern- stic borrowing from the banking system is severely e cost of credit and crowding out the private sector ould be curtailed. s .E., Balino, T.J.T., Enoch, C., Tomïs, J.T., Baliïo, Charles Enoch, Adoption of Indirect Instruments of Monetary Policy, IMF Occa- er, Washington. International Monetary Fund 126. a, 2007. Building a Financial Sector for an Emerging Market Econ- lications for the Capitalization of Banks and Non-Bank Financial s, Consultation Paper. Bank of Ghana, Accra. a, 2010. Annual Report. Bank of Ghana, Accra. Kwakye, J.K., Baffour, O., 1997. Financial and monetary develop- licies and options. In: Nyanteng, V.K. (Ed.), Policies and Options ian Economic Development. , 2nd ed. Institute of Statistical, Social mic Research (ISSER), University of Ghana, Legon. 1994. Money and growth: an alternative approach. Am. Econ. Rev. –65. .I., 1973. Money and Capital in Economic Development. Brook- ution, Washington, DC. asan, L., 1998. Financial liberalization, savings, and economic ent in Pakistan. Econ. Dev. Cult. Change 46 (April (3)), 581–597. 07. Financial Systems and Monetary Policy in Africa, Economic Southern Africa Working Paper No. 20, Cape Town, South Africa. 10. Price stability and the growth maximizing rate of inflation for od. Econ. 1 (3), 180–194. wa, N.K., 1997. From direct to indirect monetary control in Sub- frica. J. Afr. Econ. 6 (March (1)), 212–264. ., Wachtel, P., 2009. What Is Happening to the Impact of Finan- ning on Economic Growth? Vanderbilt University, Department of s Working Paper No. 09-W15. bradu-Otoo, P., 2007. Inflation management in Ghana – the output er presented at the Bank of England/Cornell University Workshop P. Quartey, G. Afful-Mensah / Review of Development Finance 4 (2014) 115–125 125 on New Developments in Monetary Policy in Emerging Economies, London, 17–18 July. Shaw, E., 1973. Financial Deepening in Economic Development. Oxford Uni- versity Press, New York. Further reading Cohen, D., 2000. The HIPC Initiative: True and False Promises. OECD Devel- opment Centre, Working Paper No. 166 (formerly Technical Paper No. 166). OECD, Paris. Government of Ghana, 1995. Ghana – Vision 2020: The First Step (1996–2000). Presidential Report on Co-ordinated Programme of Economic and Social Development Policies (Policies for the Preparation of the 1996–2000 Devel- opment Plan), Available at www.ndpc.gov.gh. IMF, 2006. Poverty Reduction Strategy Paper, Available at: www.imf.org/external/np/prsp/prsp.asp (accessed 27.09.13). NDPC, 2003. Ghana Poverty Reduction Strategy (2003–2005). National Devel- opment Planning Commission, Accra. NDPC, 2006. Growth and Poverty Reduction Strategy (2006–2009). National Development Planning Commission, Accra. NDPC, 2010. Medium Term National Development Agenda – The Ghana Shared Growth and Development Agenda (2010–2013), vol. 1. National Develop- ment Planning Commission, Accra. NDPC, 2011. Annual Progress Report – Implementation of the Ghana Shared Growth and Development Agenda (GSGDA), 2010–2013. National Devel- opment Planning Commission, Accra.