Quantity Theory of Money (original) (raw)
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American Journal of Economics
Purpose: Inflation is a concern in both developed and developing countries as it leads to a fall in profit margins and makes it difficult in drawing households’ budgets. The Medium Term Plan report (2008-2012) indicates that Mbita Division of Homa-Bay County has had the effects of inflation in recent times as many fish industries are closing down, an indicator of a fall in private domestic capital and also an increase in the unemployment rate. The purpose of this study was to determine the effect of inflation on the household expenditures in Mbita Division, Kenya. Methodology: The study adopted exploratory and correlation research designs. Exploratory research design gave an insight into the households’ expenditure behavior while correlation research design facilitated the establishment of relationships among the research variables. A sample size of 374 heads of households was selected from a total of 13,789 households in the Division. The individual respondents were drawn by the us...
THE EFFECT OF MONETARY POLICY ON GENERAL PRICE LEVEL IN GHANA
The study seeks to establish the possible effect of monetary policy on prices in Ghana, examining the role of other intervening variables such as interest rate, exchange rate and household consumption expenditure. It uses annual time series data in Ghana from 1975 to 2013 and adopts the Vector Autoregressive Frameworks with VECM and Granger causality techniques. The study found an evidence for the existence of cointegrating relationship among the variables used in the study. The estimated model revealed that monetary policy rate, exchange rate, money supply, output and government expenditure is significant in explaining inflation in the long-run but in the short-run monetary policy rate influences inflation positively and significantly. Granger causality test confirm that monetary policy rate have no reverse causality with any variable in the study even though it has a uni-directional causality running itself to consumer prices and exchange rate. From the above, the study recommends that policy variables such as monetary policy rate have significant impact on price hence much attention should be given to the MPR such that its fixing will have the desired results that is expected to meet its final goal to ensure price stability. Also, the Government of Ghana could focus on investment and infrastructural development to help boost economic activity which will promote output and decline in price growth since it was evident that the magnitude of the contribution of government expenditure to price changes was very huge in the long run.