A NON-RECURSIVE STRUCTURAL EQUATION MODELING OF MACROECONOMIC VOLATILITY CLUSTERING IN GHANA.

We investigate the presence of fiscal procyclicality, and the Keynesian effect of expansive fiscal policies. We further investigate how policy rates contribute to volatilities in +cedi-dollar rates, and the effects of commodity price movements on macroeconomic volatilities, and how monetary and fiscal policies mediate those effects.

We found evidence for reduced procyclicality. We also found that positive shocks to government fiscal stimulus have significant Keynesian effects on the economy. These combine evidence of reduced procyclicality and Keynesian effects of fiscal stimulus will lead to a growing significance of fiscal policy over monetary policies in any act of rebalancing the economy in the future.