Is Money Supply Stationary in Ghana?

Abstract

The paper investigate the unit root properties of Ghana's money supply (M2) using Augmented Dickey-Fuller (ADF) and Kwiatkowski-Phillips-Schmidt-Shin (KPSS) unit root models for the period of 1970-2011 in a linear model using annual data. The empirical results suggest significant unit root in M2 series of Ghana during the period under discussion. Shocks to M2 series are permanent and not temporary. Monetary policy makers should incorporate these findings into their policy plans. In using M2 series for econometric time series analysis the findings should be taken into consideration to avoid spurious results.  Future studies should examine unit root with structural breaks and panel unit root model.