a. (7 Marks)

The main differences between early monetarists (or quantity theorists) and modern monetarists revolve around their theoretical foundations, policy implications, and adaptability to economic dynamics. Early monetarists, rooted in the classical quantity theory of money (e.g., as articulated by Irving Fisher in MV = PT, where M is money supply, V is velocity, P is price level, and T is transactions), emphasized a direct, proportional relationship between money supply and price levels, assuming velocity and output are stable. They viewed money as neutral in the long run, primarily affecting nominal variables like prices, with little impact on real output. Policy-wise, they advocated for a strict rule-based control of money supply growth to match long-term output growth, avoiding discretionary interventions.

Modern monetarists, led by figures like Milton Friedman, built on this but incorporated more nuance, recognizing short-term non-neutrality of money (e.g., money supply changes can temporarily affect real output via expectations and lags). They emphasized the role of expectations, the natural rate of unemployment, and the Phillips curve’s vertical long-run shape. Modern monetarists also acknowledged velocity instability (due to financial innovations) and supported adaptive rules, like Friedman’s k-percent rule for steady money growth, but with flexibility for central bank independence. In Ghana’s context, this evolution is evident in the Bank of Ghana’s (BoG) shift from rigid money targeting in the 1980s-1990s to inflation targeting since 2002, incorporating modern monetarist ideas amid financial liberalization under the Financial Sector Adjustment Programme (FINSAP).

Consensus among Classicals, Monetarists, and Keynesians includes:

• Agreement on money’s long-run neutrality: All schools concur that sustained money supply growth primarily leads to inflation without permanently boosting real output (e.g., Classicals via quantity theory, Monetarists via adaptive expectations, Keynesians via long-run aggregate supply).
• Recognition of inflation’s costs: They agree inflation erodes purchasing power, distorts resource allocation, and can lead to hyperinflation if unchecked, as seen in Ghana’s 1980s hyperinflation episode.
• Importance of stable monetary policy: While differing on tools (e.g., Keynesians favor fiscal over monetary), there’s consensus on avoiding erratic policies; for instance, BoG’s Monetary Policy Committee (MPC) decisions reflect this balanced approach.

b. (8 Marks)

Authorities, such as central banks like the BoG, intervene in money markets to manage liquidity, influence interest rates, and ensure financial stability. Methods include:

• Open Market Operations (OMOs): Buying or selling government securities (e.g., Treasury bills) to inject or withdraw liquidity. In Ghana, BoG uses repo and reverse repo auctions to control short-term rates, as per the BoG Act 2002 (Act 612, as amended).
• Reserve Requirements: Adjusting the Cash Reserve Ratio (CRR) for banks, mandating a portion of deposits held as reserves. BoG reduced CRR from 10% to 8% in 2020 to boost lending during COVID-19, per BoG Notice BG/GOV/SEC/2020/03.
• Discount Window Lending: Providing short-term loans to banks at the policy rate (e.g., BoG’s Monetary Policy Rate, currently around 29% as of 2025), acting as lender of last resort to prevent liquidity crises, similar to responses during the 2017-2019 banking cleanup.
• Moral Suasion: Informal guidance to banks on lending practices or rates, often through MPC press releases or directives, influencing behavior without legal force.
• Foreign Exchange Interventions: Buying/selling forex in the interbank market to stabilize the cedi, indirectly affecting money market liquidity, as seen in BoG’s 2022 interventions amid cedi depreciation.
• Standing Facilities: Corridor systems where banks borrow or deposit at rates around the policy rate, helping anchor overnight rates.
• Quantitative Easing (QE)-like Measures: In extreme cases, purchasing assets to expand balance sheets, though less common in Ghana; post-DDEP (2022-2024), BoG provided liquidity support to banks via zero-coupon bonds.

These methods ensure alignment with Basel III liquidity standards adapted in Ghana’s Capital Requirements Directive (2018).

c. (5 Marks)

Five key sources of finance for real estate developers in Ghana include:

• Bank Loans: Commercial mortgages from banks like GCB or Ecobank, often secured by property, compliant with BoG’s lending guidelines under Act 930.
• Equity Financing: Developer’s own funds or investor equity, including venture capital from firms like Databank.
• Bonds and Debt Securities: Issuing corporate bonds on the Ghana Fixed Income Market (GFIM), e.g., HFC Bank’s housing bonds.
• Government Subsidies/Partnerships: Funding via programs like the National Home Mortgage Finance Corporation or Affordable Housing initiatives under the Ministry of Works and Housing.
• International Financing: Loans from multilateral institutions like the World Bank or African Development Bank, or foreign direct investment, subject to BoG forex regulations.