Open Access Journal Article

A pipeline between producer and consumer prices in Ghana: A Policy Issue

by Johnson Worlanyo Ahiadorme a,* orcid  and  Linda Akoto a
a
Macroeconomics Section, Ghana Statistical Service, Accra, Ghana
*
Author to whom correspondence should be addressed.
FEL  2023, 17; 2(3), 17; https://doi.org/10.58567/fel02030002
Received: 2 October 2023 / Accepted: 11 November 2023 / Published Online: 20 November 2023
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Abstract

As prices have grown at their fastest pace in recent times, inflation has become a key concern for the macro-policy environment. In many jurisdictions, consumer prices have typically formed the basis for price stability policies. Notwithstanding, producer prices remain an important channel and must be closely watched. We utilise data on Ghana and investigate the causal links between consumer and producer inflation and assess the necessity to include producer inflation target in the monetary policy rule. Our VECM and Granger causality analyses show that consumer and producer prices exhibit very stable long-term relationship and short-term gaps between the two tend to normalise over time. The relationship between consumer and producer prices has not been a one-sided lag structure, even though producer prices lead more than lag consumer prices. We conclude that Bank of Ghana’s monetary policy design that does not distinguish between consumer and producer inflation is less problematic at the moment.

Keywords: Inflation; Monetary policy; Granger causality; VECM; CPI; PPI;
Copyright: © 2023 by Ahiadorme and Akoto. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.
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ACS Style
Ahiadorme, J. W.; Akoto, L. A pipeline between producer and consumer prices in Ghana: A Policy Issue. Financial Economics Letters, 2023, 2, 17. https://doi.org/10.58567/fel02030002
AMA Style
Ahiadorme J W, Akoto L. A pipeline between producer and consumer prices in Ghana: A Policy Issue. Financial Economics Letters; 2023, 2(3):17. https://doi.org/10.58567/fel02030002
Chicago/Turabian Style
Ahiadorme, Johnson W.; Akoto, Linda 2023. "A pipeline between producer and consumer prices in Ghana: A Policy Issue" Financial Economics Letters 2, no.3:17. https://doi.org/10.58567/fel02030002
APA style
Ahiadorme, J. W., & Akoto, L. (2023). A pipeline between producer and consumer prices in Ghana: A Policy Issue. Financial Economics Letters, 2(3), 17. https://doi.org/10.58567/fel02030002

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