Despite being criticized by domestic economic think-tanks for the introduction of the inflation targeting (IT) regime some few years ago, the Bank of Ghana (BoG) says that the regime has rather helped to reduce inflation, stable exchange rate and general growth of the Ghanaian economy.
According to the bank, since its declaration in 2007 as IT central bank, it has been able to guide the bank's monetary policy management, which enhances the overall growth and development of the country.
A senior official at the Financial Stability Department of the BoG, Fiifi Blankson, made these known at the opening of a two-day workshop on economic and financial reporting for some selected business journalists in Accra.
He argued that the revolution of the monetary policy management in the country points to the bank's efforts at delivery on its mandate.
Mr. Blankson was quick to add: 'since monetary policy depends on a whole set of information, as well as underlying models of the economy, the adoption of a framework at any point in time has been driven by the needs of the real economy.'
Other drivers, he mentioned, include the depth and level of sophistication of financial institutions and financial instruments, and international best practice.
Like other central banks, BoG continues to fine-tune its framework while assessing its performance, Mr. Blankson stated.
Presenting a paper on 'Inflation Targeting: A Tool for Monetary Policy in Ghana', the Head of Policy at the BoG, Dr. Benjamin Amoah, noted that the current framework was designed to engineer a switch to low inflation and exchange rate stability through increased coordination with the fiscal.
He added that the fiscal policy was set to deliver sound public finances anchored on domestic debt reduction to deal with the problem of fiscal dominance, but also crowd-in private sector.
The Head of Policy emphasized that 'focus of monetary policy within the new macroeconomic framework is to achieve price stability, operationalized through the adoption of the IT.
Dr. Amoah pointed out that the policy arena was primarily characterized by fiscal dominance with persistent fiscal deficits were financed by monetary accommodation; and strong inflation expectations became embedded in the economy due to past high inflation and exchange rate volatility.
On exchange rate management, Gershon Agbledzorwu of the BoG's Treasury Department told the journalists that the market for foreign exchange currencies is a worldwide market that is informal structure and it is open nearly 24 hours a day trading continuously from Sunday morning.
It is the most liquid market in the world and transactions are largely over-the-counter; and they can be heavily managed through governments' intervention, particularly in the emerging market, he indicated.
Daily forex turnover across all products-spot, forwards, foreign exchange swaps and options averages $4 trillion.