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Business and Economics > Production and Operations Management

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Cover IMF Working Papers
Quarterly Projection Model for the Bank of Ghana: Extensions and Applications
Philip Abradu-Otoo
,
Joseph K. Acquah
,
James Attuquaye
,
Simon Harvey
,
Francis Loloh
,
Shalva Mkhatrishvili
,
Valeriu Nalban
,
Daniel Ngoh
,
Victor Osei
, and
Michael Quansah
The paper documents the latest extensions of the Bank of Ghana’s Quarterly Projection Model (QPM), used regularly to produce policy analysis and forecasts in support of the Bank’s policy processes. The decomposition of GDP allows to separate the agriculture and oil sectors, driven by exogenous and international developments, from non-agriculture non-oil activities, which are more relevant from the central bank’s perspective of assessing the business cycle position. Inter-sectoral price spillovers and their role in the formation of inflation expectations are explicitly accounted, with important policy implications. Specific model applications – including impulse response functions and simulations of shocks that affect agricultural production, e.g., those caused by climate disruptions; and counterfactual simulations to evaluate recent policy choices – highlight the usefulness of the extended QPM in providing a more detailed account of the economic developments, enhance forecast coverage, and broaden its underlying narrative, thus strengthening the BOG’s forward-looking policy framework.
Keywords:
Ghana; Forecasting and Policy Analysis; Quarterly Projection Model; Monetary Policy; Transmission Mechanism; A. impulse response; impulse response function; reaction function; policy analysis; Bank of Ghana's Quarterly Projection Model; price spillover; Inflation; Output gap; Inflation targeting; Real interest rates; Global
Cover Technical Assistance Reports
Ghana: Technical Assistance Report-Report on Developing the Forecasting and Policy Analysis System (FPAS) at the Bank of Ghana (BOG)
International Monetary Fund. Institute for Capacity Development
and
International Monetary Fund. African Dept.
This technical assistance (TA) report presents the outcomes of the multi-year Bank of Ghana (BOG) Forecasting and Policy Analysis System (FPAS) TA project, conducted between late-2019 and mid-2024 over a total of seven missions, three in-person and four virtual. The project has focused on upgrading and building new institutional capacity for model-based policy analysis and macroeconomic forecasting, along its integration into monetary policy processes and external communications. BOG staff has made remarkable progress and built a strong skillset in providing analytical support to the policymakers. Model-based work plays an important role in the BOG internal deliberations and represents the key input in forward-looking monetary policy formulation, including in regular external communications. Remaining recommendations relate to ensuring FPAS work sustainability and further streamline external communications.
Keywords:
Monetary policy; Inflation targeting; Central banks; Inflation; Output gap; Exchange rate; Monetary policy transmission; Ghana.; IMF TA project team; BOG forecasting team; TA team; BOG's Forecasting and Policy Analysis System; TA mission; Exchange rates; Agricultural sector; Global
Cover IMF Working Papers
Quarterly Projection Model for the Bank of Ghana
Philip Abradu-Otoo
,
Ivy Acquaye
,
Abubakar Addy
,
Nana Kwame Akosah
,
James Attuquaye
,
Simon Harvey
,
Shalva Mkhatrishvili
,
Zakari Mumuni
, and
Valeriu Nalban
The paper describes the Quarterly Projection Model (QPM) that underlies the Bank of Ghana Forecasting and Policy Analysis System (FPAS). The New Keynesian semi-structural model incorporates the main features of the Ghanaian economy, transmission channels and policy framework, including an inflation targeting central bank and aggregate demand effects of fiscal policy. The shock propagation mechanisms embedded in the calibrated QPM demonstrate its theoretical consistency, while out-of-sample forecasting accuracy validates its empirical robustness. Another important part of the QPM is endogenous policy credibility, which may aggravate policy trade-offs in the model and make it more realistic for developing economies. Historical track record of real time policy analysis and medium-term forecasting conducted with the QPM – as a component of the broader FPAS analytical organization – establishes its critical role in supporting the Bank’s forward-looking monetary policy framework.
Keywords:
Ghana; Forecasting and Policy Analysis; Quarterly Projection Model; Monetary Policy; Transmission Mechanism; out-of-sample forecasting accuracy; D. monetary policy credibility channel; projection model; impulse response; policy analysis; Inflation; Output gap; Inflation targeting; Exchange rates; Central bank policy rate; Global
Cover IMF Staff Country Reports
West African Economic and Monetary Union: Selected Issues
International Monetary Fund. African Dept.
Selected Issues
Keywords:
sovereign bond market stage; deficit ceiling; sovereign bond market development; growth loss; stages of building block development; Securities markets; Debt limits; Securities; Total factor productivity; West Africa; Global; Sub-Saharan Africa; COVID-19
Cover IMF Working Papers
Rethinking Development Policy: Deindustrialization, Servicification and Structural Transformation
Manoj Atolia
,
Mr. Prakash Loungani
,
Milton Marquis
, and
Mr. Chris Papageorgiou
This paper takes a fresh look at the current theories of structural transformation and the role of private and public fundamentals in the process. It summarizes some representative past and current experiences of various countries vis-a-vis structural transformation with a focus on the roles of manufacturing, policy, and the international environment in shaping the trajectory of structural transformation. The salient aspects of the current debate on premature deindustrialization and its relation to a middle-income trap are described as they relate to the path of structural transformation. Conclusions are drawn regarding prospective future paths for structural transformation and development policies.
Keywords:
Development policies; structural transformation; premature deindustrialization; middle-income trap; push factors; growth diagnostics; high-productivity IT service; export structure; net importer; open economy; labor-saving technology; high-productivity service; middle-income economy; productivity economy; Manufacturing; Income; Productivity; Employment; Global
Cover IMF Working Papers
The Sources of Business Cycles in a Low Income Country
Romain Houssa
,
Jolan Mohimont
, and
Mr. Christopher Otrok
We examine the role of global and domestic shocks in driving macroeconomic fluctuations for Ghana. We are able to study the impact of exogenous shocks including productivity, credit supply, and commodity price shocks. We identify the shocks with a combination of sign and recursive restrictions within Bayesian VAR models. As a benchmark we provide results for South Africa to document the difference between two economies with similar structures but different levels of development. We find that global shocks play a more dominant role in South Africa than in Ghana. These shocks operate through three channels: trade, credit and commodity prices.
Keywords:
WP; commodity price; productivity shock; monetary policy; inflation targeting; SA credit; Credit Shocks; Developing Countries; Macroeconomic Stabilization Policies; Sign Restrictions; Bayesian VAR; SA default; South Africa statistics; credit shock; credit supply shock; Credit; Commodity price shocks; Productivity; Real effective exchange rates; Inflation; Africa; Global
Cover IMF Working Papers
Does Money Matter for Inflation in Ghana?
Mr. Arto Kovanen
Money has only limited information value for future inflation in Ghana over a typical monetary policy implementation horizon (four to eight quarters). On the other hand, currency depreciation and demand pressures (as measured by the output gap) are shown to be important predictors of future price changes. Inflation inertia is high and inflation expectations are largely based on backward-looking information, suggesting that inflation expectations are not well anchored and hence more is needed to strengthen the credibility of Ghana's inflation-targeting regime.1
Keywords:
WP; monetary policy; money demand; inflation expectation; monetary policy credibility; inflation-targeting; monetary policy implementation; gap indicator; inflation-targeting arrangement; inflation objective; reaction function; Inflation; Inflation targeting; Monetary base; Demand for money; Output gap; Africa
Cover IMF Working Papers
On the Optimal Adherence to Money Targets in a New-Keynesian Framework: An Application to Low-Income Countries
Mr. Andrew Berg
,
Ms. Filiz D Unsal
, and
Mr. Rafael A Portillo
Many low-income countries continue to describe their monetary policy framework in terms of targets on monetary aggregates. This contrasts with most modern discussions of monetary policy, and with most practice. We extend the new-Keynesian model to provide a role for “M” in the conduct of monetary policy, and examine the conditions under which some adherence to money targets is optimal. In the spirit of Poole (1970), this role is based on the incompleteness of information available to the central bank, a pervasive issues in these countries. Ex-ante announcements/forecasts for money growth are consistent with a Taylor rule for the relevant short-term interest rate. Ex-post, the policy maker must choose his relative adherence to interest rate and money growth targets. Drawing on the method in Svensson and Woodford (2004), we show that the optimal adherence to ex-ante targets is equivalent to a signal extraction problem where the central bank uses the money market information to update its estimate of the state of the economy. We estimate the model, using Bayesian methods, for Tanzania, Uganda (both de jure money targeters), and Ghana (a de jure inflation targeter), and compare the de facto adherence to targets with the optimal use of money market information in each country.
Keywords:
WP; interest rate
Cover IMF Working Papers
A Model for Full-Fledged Inflation Targeting and Application to Ghana
Kevin Clinton
,
Jihad Dagher
,
Mr. Ondrej Kamenik
,
Mr. Douglas Laxton
,
Ali Alichi
, and
Marshall Mills
A model in which monetary policy pursues full-fledged inflation targeting adapts well to Ghana. Model features include: endogenous policy credibility; non-linearities in the inflation process; and a policy loss function that aims to minimize the variability of output and the interest rate, as well as deviations of inflation from the long-term low-inflation target. The optimal approach from initial high inflation to the ultimate target is gradual; and transitional inflation-reduction objectives are flexible. Over time, as policy earns credibility, expectations of inflation converge towards the long-run target, the output-inflation variability tradeoff improves, and optimal policy responses to shocks moderate.
Keywords:
WP; interest rate; monetary policy
Cover IMF Staff Country Reports
Ghana: Selected Issues
International Monetary Fund
This Selected Issues paper on Ghana shows that as a small, open low-income economy, the country faces several major challenges in its conduct of disinflation policy. Ghana has historically experienced volatile and often high inflation rates. The paper also presents a model that recognizes difficulties being faced by Ghana, among them less-than-perfect credibility of announcements of inflation reduction and policymaker aversion both to movements of output from its potential level and to variability in the interest rate.
Keywords:
ISCR; CR; Ghana; liberalization; monetary policy; inflation expectation; fiscal policy; debt dynamics; inflation reduction; capital flow; overarching development strategy; policy objective; yield curve; investor confidence; Inflation; Capital account liberalization; Inflation targeting; Disinflation; Capital inflows; Sub-Saharan Africa