In recent times, most central banks have adopted inflation-targeting monetary policy approach aimed primarily to achieve single-digit inflation. Though, the literature suggest that low level of inflation promotes economic growth, the literature is silent on the threshold inflation level needed to promote growth. Studies in developing countries that seek to estimate the threshold level of inflation that promotes economic growth do not support single-digit inflation level. The question that arises is whether single-digit inflation support economic growth. The study thus investigate whether single-digit inflation has any positive effect on economic growth and whether inflation-targeting policy promotes economic growth. The study used annual time series data spanning from 1965 to 2011 for Ghana. Using autoregressive distributed lag model technique, the study found that single-digit inflation has no significant effect on economic growth both in the short and long run. However, the findings of the study supports inflation targeting policy as growth enhancing tool in both short and long run.

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PurposeHigh inflation levels remain a challenge in macroeconomic stabilization policies among developing economies. Oil price is identified as an important driver of inflation. In the wake of high and unstable international oil prices, the question regarding the relationship between inflation and crude oil prices, and its implication for economic welfare has become a fundamental empirical issue.Design/methodology/approachThis question is explored by estimating a non-linear autoregressive distribution lags (NARDL) model of inflation-oil nexus that examined the asymmetric response of inflation to oil price changes. The study then derived the welfare implication of the asymmetric responses, with implications for the petroleum pricing regime in Ghana.FindingsThe study found that inflation responds asymmetrically to oil prices in the long-run but not in the short-run. The welfare cost associated with the asymmetric response increases with increasing rate.Practical implicationsThe findings of this study have some implications for petroleum product pricing in Ghana. Recently, Ghana has moved from regulating petroleum prices to the automatic adjustment system. By this policy, petroleum prices change in tandem with the crude oil prices and exchange rates on the international market. Whiles this policy might be comparatively efficient, the evidence of asymmetric response of inflation to changes in oil prices raises some issues about the welfare effect of the policy.Originality/valueThe paper contributes to the literature on the inflation-oil price nexus by investigating critical questions that remain puzzling. These questions include; Does inflation respond asymmetrically to the positive and negative shock of equal magnitude in oil prices? Does inflation response to the asymmetry changes in oil prices have any implications for the welfare of the country? Is the effect of oil price changes pernicious?

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