Public Sector Wage and Inflation in Ghana

Abstract

Achieving price stability has been in the orbit of concern of state authorities for time immemorial. This paper is therefore focused on determining empirically the impact of public wage bill on inflation in Ghana for the period of 1986-2014. Using an Autoregressive Distributed Lag (ARDL) to cointegration model, it was discovered from the study that public wage bill, currency depreciation rate, money supply, and fiscal deficit all have significant impact on inflation in Ghana. The outcome of this study postulates that the rate of inflation determination in Ghana is also a fiscal phenomenon in spite of the significant and domineering role played by monetary expansion. Consequently, equal attention must be accorded both fiscal and monetary policy in the fight against the rate of inflation in Ghana for appreciable and sustained result.