Open AccessEffect of International Remittances on Inflation in Ghana Using the Bounds Testing Approach
Author(s) -
Abdallah Abdul-Mumuni,
Christopher Quaidoo
Publication year - 2016
Publication title -
business and economic research
Language(s) - English
Resource type - Journals
ISSN - 2162-4860
DOI - 10.5296/ber.v6i1.8635
Subject(s) - economics , inflation (cosmology) , order (exchange) , consumption (sociology) , government (linguistics) , inflation rate , variable (mathematics) , monetary economics , econometrics , monetary policy , finance , mathematics , mathematical analysis , social science , linguistics , philosophy , physics , sociology , theoretical physics
This paper empirically examines the effect of international remittances on inflation in Ghana from 1979 to 2013 by incorporating international remittances as an exogenous variable to the standard inflation function. Applying the bounds testing approach, the empirical results indicate that international remittances have a significant effect on inflation in the long-run. However, in the short-run, no significant relationship is evident between these two variables. The study recommends that in order to reduce the effect of international remittances on inflation rate and increase the impact on growth, the government should improve public infrastructure. By this, excessive transfer fees would reduce and these remittances could be channeled into more productive sectors rather than being used mainly for consumption purposes.