Dr. Dennis Nsafoah

A US-based Ghanaian Assistant Professor of Economics, Dr Dennis Nsafoah, wants the Bank of Ghana’s mandate to remain price stability.

According to him, central banks are most effective when their mandates are clear, focused, and aligned with the policy tools at their disposal.

“Monetary policy tools are fundamentally fashioned to maintain price stability over the long run. Interest rate policy, liquidity management, and other monetary policy instruments are more effective at controlling inflation expectations and stabilising the general price level than at generating sustained long-term employment growth, Dr Nsafoah, who is an assistant professor of economics at Niagara University, said in an article.

“The reality is that there are better policy tools for achieving employment objectives”, he added.

While the National Development Planning Commission (NDPC) emphasises employment, which deserves support, Dr Nsafoa said caution must be exercised regarding proposals to expand the mandate of the Bank of Ghana to include a formal dual mandate similar to that of the Federal Reserve System in the United States.

He continued that the fiscal policy, industrial policy, infrastructure development, education reform, agricultural modernisation, institutional strengthening, and private sector development policies are all far more suited to driving long-term job creation than monetary policy.

Therefore, attempting to force monetary policy to simultaneously pursue aggressive employment targets risks weakening the credibility of the central bank’s inflation-fighting mandate, particularly in an economy like Ghana, where inflation expectations can become unanchored relatively quickly.

The US Dual Mandate Works Largely Because of “Divine Coincidence”

Dr Nsafoah explained further that when discussions about a dual mandate arise in Ghana, proponents often point to the United States as an example of why central banks should simultaneously pursue both price stability and maximum employment. However, he said, “one important point that is frequently overlooked is that the US Federal Reserve’s dual mandate has functioned relatively well largely because the US economy has often benefited from what economists describe as'“divine coincidence” — situations where policies aimed at stabilising inflation also support employment growth in the short run”.

Ghana Needs Policy Coordination — Not Mandate Confusion

He suggested that the solution is to improve coordination between institutions responsible for macroeconomic stability and those responsible for structural transformation and employment creation, and not to dilute the mandate of the Bank of Ghana.

“The NDPC, Ministry of Finance, Ministry of Trade and Industry, Ministry of Education, and private sector stakeholders all have critical roles to play in building a jobs-centred development strategy. Meanwhile, the Bank of Ghana must continue focusing primarily on maintaining price stability and anchoring inflation expectations — a responsibility that remains essential for protecting household purchasing power, supporting investment planning, and maintaining confidence in the economy”.

He alluded that a high-inflation environment ultimately hurts workers and businesses the most.

To be clear, he said there may be short-run trade-offs between price stability and employment growth. “Monetary policy tightening aimed at reducing inflation can temporarily slow economic activity and weaken labour market conditions. However, in the long run, such a trade-off is largely non-existent. Sustainable employment growth cannot occur in an environment of persistent macroeconomic instability, high inflation, and unanchored inflation expectations”.

He concluded by calling for a broad stakeholder forum involving policymakers, economists, labour unions, businesses, academia, and financial institutions, which he believes would be valuable in fully discussing the future direction of Ghana’s macroeconomic framework and the appropriate mandate of the central bank.

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Bank of Ghana's only mandate is price stability - Dr Nsafoah

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