Monetary Policy and Income Inequality in Ghana

Abstract

Monetary policy, even if minimal and uncertain regarding the direction of impact, has been found to have distributional effects especially in the developed world. The purpose of this study is to determine the impact monetary policy has on income inequality in Ghana which can be a case study for a developing African Economy with independent monetary policy. Data for the period 2002Q1 to 2013Q4 is used. The study used the Impulse Response Functions (IRFs) by Local Projections methodology in estimating the degree and direction of impact of monetary policy on income distribution in Ghana. From the analysis, it is concluded that contractionary monetary policy leads to an increase in disposable income inequality in Ghana marginally.