Author(s): Emmanuel Attah Kumah Amponsah, George Oppong Appaigyei Ampong, Stephen Owusu Afriyie, Michael Nana Owusu-Akomeah, Joseph Asare,Richard Amponsah, Freda Quarshie.
This study examined the effectiveness of monetary policy in managing inflation and real GDP and compares the monetary policy between Ghana and India using a multivariate modeling technique of the Vector Autoregression (VAR) and focusing on impact of broad money supply (M2), lending rate, USD exchange rate and domestic credit for the quarterly period 2000-2022 in the case of Ghana and semi-annual period of 1977-2022 in the case of India. The stochastic shocks of monetary policy actions and decisions on the real GDP and inflation were carried out by examining the dynamic nature of Granger Causality Test. The study found that the potency of monetary policy in influencing real GDP and inflation is limited in the case of Ghana but the potency of monetary policy in influencing real GDP is not limited in the case of India, as important channels of monetary transmission are not fully functional in the case of Ghana. It has revealed that money supply and lending rate are the most important variables in predicting real GDP and inflation in Ghana during the study period. This study also revealed that money supply, lending rate, domestic credit and exchange rate are important variables in predicting real GDP in India during the study period. It is recommended that a more expansionary monetary policy in Ghana and a more contractionary monetary policy in India should accompany a set of policies geared towards improving investment efficiency and bolstering consumption.