Macroeconomic Policy Formulation: The Driver of Economic Welfare in Ghana

  • Samuel Erasmus Alnaa Department of Accountancy, Bolgatanga Technical University, Bolgatanga, Upper East Region, Ghana
  • Juabin Matey Directorate of Research, Innovation, and Development (DRID), Bolgatanga Technical University, Bolgatanga, Upper East Region, Ghana
Keywords: Economic welfare, citizens, growth, macroeconomic policy, implementation, development


Dialogue on the effects of macroeconomic policies relative to the welfare of citizens has remained virtually unchanged since time immemorial. These economic policy discussions have had different dimensions, from subjective to objective welfare. As a contribution to literature, this paper thoughtfully wades into this discourse with a specific reference to national policies on nominal GDP growth rate, inflation, and unemployment and how they interact to impact the welfare of citizens. It is common knowledge that macroeconomic policy decisions affect the very survival of citizens; however, it is unclear how policymakers communicate the long-term impact of these blueprints on the livelihoods of citizens to the implementing authorities. What is in the public domain are seminal reports on nominal annual rates of these macroeconomic variables, which are thought to either imply an improvement or a deterioration in the well-being of citizens. Indeed, not every gain in nominal rates, particularly GDP, can be construed as an improvement in the economic well-being of citizens. This study questions whether different approaches to designing and implementing macroeconomic policies are the reasons for the mismatch in the living standards of people around the world, or whether the free market economy, which is deficient in developing people's capabilities, is rather dictating the well-being of citizens. The vector error correction model (VECM) results indicate that economic growth (using GDP as a proxy) has a negative effect on welfare in the long run. As such, we believe that national governments should establish and implement comprehensive and long-term macroeconomic policies capable of boosting the welfare of citizens through creating jobs of all varieties, because mere annual gains in macroeconomic indicators do not realistically reflect the economic welfare of the citizenry.


Download data is not yet available.


Arndt, H.W. (1987). Economic development: the history of an idea. Chicago, University Press.

Berry, A. (2013). Growth, employment, poverty, and social protection: a conceptual framework.

Callen, T. (2020). Gross domestic product: an economy’s all. Finance & development

Cardoso, E. (1992). Inflation and poverty. NBER Working Paper No. 4006.

Darko, C. K. (2015). Determinants of economic growth in Ghana, ZBW - Deutsche Zentralbibliothek Für Wirtschaftswissenschaften,LeibnizInformationszentrum Wirtschaft, Kiel und Hamburg.

de Carvalho, A.R., Ribeiro, R. S. M., &. Marques, A.M. (2018) Economic development and inflation: a theoretical and empirical analysis. International Review of Applied Economics, 32(4), 546-565.

Dorrance, G.S. (1963). The effect of inflation on economic development. staff papers, International Monetary Fund, 10, 1-47.

Dynan, K., & Sheiner, L. (2018). GDP as a measure of economic well-being. Hutchins Center Working Paper #43.

Feldman, M., Hadjimichael, T., Lanahan, L., & Kemeny, T. (2016). The logic of economic development: a definition and model for investment. Environment and Planning C: Government and Policy, 34, 5–21.

Easterlin, R. (1974). Does economic growth improve the human lot? some empirical evidence in P. David, P., & Reder, M. (eds). Nations and households in economic growth: essays in honour of Moses Abramovitz. New York; London: Academic Press.

Engle R. F., & Granger C. W. J. (1987). Co-integration and error-correction: Representation, estimation and testing, Econometrica, 55(2), 987-1008.

Feldstein, M. (2017). Underestimating the real growth of GDP, personal income, and productivity. Journal of Economic Perspectives 31,145-64.

Frey, B., & Stutzer, A. (2002a). Happiness and economics. how the economy and institutions affect human well-being. Princeton, Oxford: Princeton University Press.

Gopalakrishna, B.V., & Jayaprakash, R. (2012). Economic growth and human development: the experience of Indian states. The Indian Journal of Industrial Relations, 47(4), 634-644.

Gregory, R. G., & Sheehan, P. (1998). Poverty and the collapse of full employment; in R. Fincher and J. Niewenhuysen, (Eds.), Australian Poverty: then and now, Melbourne University Press, Melbourne, 103-26.

Hamedani, M.Y.G., & Markus, H.R. (2019) Understanding culture clashes and catalyzing change: A culture cycle approach. Frontiers in Psychology, 10(700).

Hoff, K., & Stiglitz, J.E., (2001). Modern economic theory and development. In: Meier, G., Stiglitz, J.E. (Eds.), Frontiers of Development Economics, 389-459. Oxford University Press, Oxford.

International Monetary Fund. (2017). Back to basics: economic concepts explained. Finance & Development. explained.pdf.

Johansen, S. (1995). Likelihood-based Inference in cointegrated vector autoregressive models. Oxford University Press, New York

Labonte, M. (2016). Unemployment and inflation: Implications for policymaking. Congressional Research Services.

Lucas, R. E. (1988). On the mechanics of economic development. Journal of monetary economics, 22(1), 3-42, North-Holland.

MacKinnon, J.G., Haug, A.A., & Michelis, L. (1999). Numerical distribution functions of likelihood ratio tests for cointegration. Journal of Applied Econometrics, 14, 563-577.

Mookherjee, D., & Ray, D. (1999). Readings in the theory of economic development. Manuscript.

Moulton, B., & van de Ven, P. (2018, March 9th-10th). In N. Ahmad, B. Moulton, J.D. Richardson, & P. van de Ven, (Eds). Introduction to “challenges of globalisation in the measurement of national accounts”. Addressing the challenges of globalization in measuring national accounts. 2018 Conference on Research in income and wealth. University Of Chicago Press,

Omar, D.A. (2020). Inter-relationship between economic development and human development- Analytical study of selected Arab countries. Northern Technical University, Iraq.

Osiakwan, R.O. (2013). Understanding the implication of changing levels of inflation on standard of living in Ghana. Ashesi University College, Ghana.

Piotrowska, M. (2016). Direct and indirect effects of pro-poor growth. National Centre for Science in Poland.

Perovic, L. M., & Golem, S. (2010). Investigating macroeconomic determinants of happiness in transition countries: how important is government expenditure? Eastern European Economics, 48(4), 59–75.

Ranis, G. (2004)., Human development and economic growth.

Sacks, D.W., Stevenson, B., & Wolfers, J. (2010). The New stylized facts about income and subjective well-being. National Bureau of Economic Research Working Paper, No. 16441

Sanfey, P., & Teksoz, U. (2007). Does transition make you happy? Economics of Transition,15(4), 707-731.

Saunders, P. (2002). The direct and indirect effects of unemployment on poverty and inequality. SPRC Discussion Paper No. 118.

Schumpeter, J. (1942). Capitalism, socialism, and democracy. New York: Harper & Bros.

Shiller, R. (1996). Why do people dislike inflation? NBER Working Paper, No. 5539.

Siyan, P., Adegoriola, A.E., & Adolphus, J. A. (2016). Unemployment and Inflation: implication on poverty level in Nigeria. MPRA Paper No. 79765.

Solow, R. (1956). A contribution to the theory of economic growth. Quarterly Journal of Economics, 70, 65-94.

Suryahadi, A., Hadiwidjaja, G., & Sumarto, S. (2012). Economic growth and poverty reduction in Indonesia before and after the Asian financial crisis. Bulletin of Indonesian Economic Studies,48(2), 209-227.

Susanto, J. (2014). Impact of economic growth, inflation, and minimum wage on poverty in Java. Media Ekonomi and Teknologi Informasi, 22.

UNDP (2020). Global human development indicators.

Zezza, A., Davis, B., Azzarri, C., Covarrubias, K., Tasciotti, L., & Anriquez. G. (2008). The impact of rising food prices on the poor. ESA Working Paper No. 08-07. Food and Agriculture Organization of the United Nations, Rome.

Zhenmin, L. Ocampo, J.A., Ghosh, J., Lin, J.Y., Liu, P., Duarte, C. Teixeira, I., Chen, Y., Valido, V.,Udovički, K., & Bárcena, A. (2020). Recovering better: economic and social challenges and opportunities. a compilation of the second high-level advisory board (HLAB) meeting. United Nations, Shenzhen, China, 16-18 October2018.

How to Cite
Samuel Erasmus Alnaa, & Matey, J. (2022). Macroeconomic Policy Formulation: The Driver of Economic Welfare in Ghana. The Journal of Management Theory and Practice (JMTP), 3(1), 78-86.
Finance & Economics