Central Bank Independence and Monetary Policy Effectiveness in Ghana: A Qualitative Analysis of Operational Autonomy and Policy Coordination

Abstract

Central bank independence (CBI) is widely regarded as a mechanism for mitigating inflation bias and achieving price stability. However, its effectiveness hinges on the central bank's ability to counterbalance fiscal excesses resulting from government actions. This study examines the operational independence of the Bank of Ghana (BoG) and its role in mitigating fiscal indiscipline to ensure the effectiveness of monetary policy. Through in-depth interviews with eight purposively selected experts, including Central Bank and Ministry of Finance officials, and academics specializing in monetary economics, the study explores the interplay between the BoG’s autonomy, policy coordination, and communication strategies. The findings reveal that while BoG’s operational independence has enhanced transparency and accountability, fiscal dominance remains a critical challenge, undermining price stability. The study highlights the need for stronger institutional mechanisms to enforce fiscal discipline, as emphasized by the Fiscal Theory of Price Level. Contrary to prior literature, the qualitative approach uncovers nuanced insights into how political and institutional contexts shape CBI’s effectiveness. The paper contributes to the discourse by bridging gaps in qualitative CBI research and offering policy recommendations for improved fiscal-monetary coordination.