In 2021, the inflation rate in Ghana amounted to about 9.98 percent compared to the previous year. Ghana’s inflation peaked at almost 17.5 percent in 2016 and is predicted to decrease to 8 percent by 2030. Steady is best for inflationAccording to economists, a steady inflation rate between two and three percent is desirable to achieve a stable economy in a country. Inflation is the increase in the price level of consumer goods and services over a certain time period. A high inflation rate is often caused by excessive money supply and can turn into hyperinflation, i.e. if inflation occurs too quickly and rapidly, it can devalue currency and cause a recession and even economic collapse. This scenario is currently taking place in Venezuela , for example. The opposite of inflation, the decrease in the price level of goods and services below zero percent, is called deflation. While hyperinflation devalues money, deflation usually increases its value. Both events can damage an economy severely. Is Ghana’s economy at risk?Ghana’s economy is considered quite stable and fast-growing, and is rich in oil, diamonds, and gold. After struggling in the years around 2015 due to increased government spending and plummeting oil prices, it is now on an upswing again. This is also reflected in the decreasing inflation rate, and other key indicators like unemployment and rapid GDP growth support this theory. However, Ghana’s government debt is still struggling with the consequences of the 2015 crisis and forecast to keep skyrocketing during the next few years.

Ghana: Real interest rate: Bank lending rate minus inflation: The latest value from is percent, unavailable from percent in . In comparison, the world average is 0.00 percent, based on data from countries. Historically, the average for Ghana from to is percent. The minimum value, percent, was reached in while the maximum of percent was recorded in .

Using Least Square Residual Minimization techniques, this paper develops an optimal reserve model, known as the OPREM model, which is essential in optimizing the costs of reserve holding. The paper also sets-out to test and compare the relative predictions of economic trends of the OPREM model as well as the predictions of alternative models in literature. Establishing the predictive accuracy of economic trends of these models are crucial for the gradual and cost-effective accumulation of reserves. The research concludes that, the decision to optimize the cost of reserves under a stable currency environment is reliant on the gold impact factor and not on inflation or interest rates. We also found on further analysis of the OPREM that the OPREM model is better positioned to eliminate the procyclicality and perverse rush in reserve build-ups experienced in developing and emerging countries by effectively setting the reserve stock against economic trends. The research fixes the optimal reserves around a benchmark of 0.7–1.2 of previous year's optimal value. However, in the absence of past optimal values, a benchmark between 2 and 6 times of average inflows for short-term analysis or analysis with small data observations. However, for long-term analysis or analysis with large data frequency (i.e., exceeding 13 data observations), the reserve stock should be fixed on a benchmark of 2–9 times of the average inflows.