Analysis of the Interactions between Inflation and Stock Prices in Ghana

Peter Arhenful^1, , Jones Adjei Ntiamoah¹ and Collins Owusu Kwaning¹

¹Accra Technical University, Accra, Ghana

Cite this paper:
Peter Arhenful, Jones Adjei Ntiamoah and Collins Owusu Kwaning. Analysis of the Interactions between Inflation and Stock Prices in Ghana. Journal of Finance and Economics. 2022; 10(2):51-56. doi: 10.12691/jfe-10-2-4

Abstract

This paper examines the relationship between inflation and stock prices in Ghana in order to assist businesses and individuals to make informed decisions when the inflation rate changes. A quantitative approach was adopted using monthly time series data from July 2007 to December 2019. The results of the unit root test revealed that the series were non-stationary at the levels but became stationary after the first difference. The results from the Multiple Regression Analysis carried out with Eviews 7.0 econometric software revealed a direct relationship between inflation and stock prices in the Ghanaian context (β = 0.762, p < 0.05). The study recommends that the central bank implement measures to keep inflation at low levels so that it does not erode the value of returns on investment in order to increase public confidence in the stock market.

Keywords:
inflation stock prices time series Ghana

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