Vol 11, No 3 (2023)

Does Modern Monetary Policy Stabilize Commodity Prices? The Paradigm During COVID-19

Stephen Troveh


The recovery of the global economy from the COVID-recession accompanied by expanding liquidity, monetary loosening, and fiscal expansion led has led to rising commodities prices across the world including Ghana. Using VEC model, we examined the effect of monetary policy expansion in Ghana on commodity prices (including cocoa, gold and crude oil). The empirical evidence suggests a short run and long run relationship between Ghana’s monetary policy and commodity prices. The long run and short-run relationship shows that Ghana’s monetary policy shock leads to an immediate rise in cocoa and gold prices index but negative impact crude oil price index which possibly reflect high production cost and an aggregate bias. In addition, whiles the analysis found that the aggregate commodity price index is positively related to monetary policy, the period characterized by COVID-19 mirrored exactly opposite the relationship found during the 2008 financial crisis. We recommend that policy makers should recognize the source of inflation before engaging in expansionary monetary policy. Also, the design of core inflation targeting is essential to inflation targeting.

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Monetary policy; Commodity price; VEC; COVID-19; Exchange rate.

Publication information

Volume 11, Issue 3
Year of Publication: 2023
ISSN: 1857 - 8721
Publisher: EDNOTERA

How to cite

Troveh, S.: Does Modern Monetary Policy Stabilize Commodity Prices? The Paradigm During COVID-19. Journal of Applied Economics and Business, Vol 11, No. 3, 5-24. (2023)