Abstract:
One of the important primary macroeconomic convergence criteria of the
West African Monetary Zone (WAMZ) is the attainment of single-digit
inflation. Available data show that but for The Gambia, none of the member
states has achieved this objective on sustained basis. This raises concerns
about the effectiveness of monetary policy transmission mechanism in
controlling inflation in the Zone. This thesis addressed three policy relevant
issues: (1) investigated the effectiveness of monetary policy transmission
mechanisms, (2) explored the opinions of experts on the conduct of monetary
policy in Ghana, and (3) assessed the role of fiscal dominance in constraining
the conduct of monetary policy. The thesis employed the mixed method. The
results showed that the channels of monetary policy transmission differ across
the WAMZ member states. While the interest rate channel remains ineffective
for the various WAMZ countries, the bank lending channel was only effective
in Ghana and The Gambia. Also, the results of the study found evidence of
exchange rate channel in Nigeria. On the other hand, the qualitative study on
Ghana revealed that the independent status of the CB has enhanced the
conduct of monetary policy in achieving price stability. Finally, the results
showed that fiscal dominance complements the inflationary effect of money
supply. The study recommended that various CBs in the WAMZ countries
should deepen their financial markets in order to boost financial
intermediation with the view to improving monetary policy transmission in
achieving price stability in the Zone.
