Single-Digit Inflation Targeting and Economic Growth

In recent times, most central banks have adopted in flation-targeting monetary policy approach aimed primarily to achieve single-digit inflation. Though , the literature suggest that low level of inflatio n promotes economic growth, the literature is silent on the th reshold inflation level needed to promote growth. S tudies in developing countries that seek to estimate the t hreshold level of inflation that promotes economic growth do not support single-digit inflation level. The qu estion that arises is whether single-digit inflatio n support economic growth. The study thus investigate whether single-digit inflation has any positive effect on economic growth and whether inflation-targeting pol icy promotes economic growth. The study used annual time series data spanning from 1965 to 2011 for Gha na. Using autoregressive distributed lag model technique, the study found that single-digit inflat ion has no significant effect on economic growth bo th in the short and long run. However, the findings of th e study supports inflation targeting policy as grow th enhancing tool in both short and long run.