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Abstract

This paper contains an empirical investigation of the e¤ects of trade and in‡ation on a conventional macroeconometric model for Ghana. First, the results corroborate the …ndings of the Fund that both devaluation and credit restraint are e¤ective in addressing the balance of payment issues facing Ghana. Second, the direction and time pattern of the e¤ects of these two policy experiments are di¤erent. Third, further depreciation of the domestic currency is unfavourable to the cause of curbing in‡ation in Ghana. It rather leads to price increases and is a source of fueling in‡ation, and could lead to a spiral of in‡ation through the agitation for higher wages by employees.

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