From my experience in monetary policy analysis at BoG-affiliated roles, these notes ground in Ghana’s context, like post-DDEP rate hikes.

a) Factors Influencing Changes in Nominal Interest Rates (10 Marks):

• Inflation Expectations: Higher anticipated inflation raises rates (Fisher effect: nominal = real + inflation). Example: Ghana’s 2022 inflation surge to 54% pushed policy rate to 30%.
• Monetary Policy: BoG adjusts via open market operations; tightening increases rates.
• Economic Growth: Strong demand for funds elevates rates; slowdown lowers.
• Government Borrowing (PSBR): High deficits crowd out, raising yields, as in DDEP.
• Global Factors: US Fed rates influence via capital flows; cedi risks add premium.
• Supply and Demand for Credit: Bank liquidity affects; post-cleanup, tighter supply hiked rates.
• Risk Premiums: Credit, liquidity risks inflate nominals.

b) Conventional Objectives of Macroeconomic Policy (10 Marks):

• Price Stability: Low inflation (BoG target 8±2%) to preserve value.
• Full Employment: Reduce unemployment via growth policies.
• Economic Growth: Sustainable GDP increase; Ghana aims 5-6% post-IMF.
• Balance of Payments Equilibrium: Stable current account, managed via reserves.
• Income Distribution: Equitable wealth, via fiscal tools. These interlink; BoG uses monetary tools, fiscal via MoF, for resilience.