Too much of the latter, relative to ex ante demand for money, can substantially impair the former. Since inflation is ultimately a monetary phenomenon, money constitutes a natural, firm and reliable “nominal anchor” for a monetary policy aimed at price stability. This accounts for why money is given a prominent role in the ECB’s monetary policy strategy.
The impact on the exchange rate in Ghana has been somewhat moderated compared to other EMs and frontier economies—a testament to the gains in macroeconomic stability achieved over the past 18 months. While currencies in other EMs are still under stress, Ghana’s currency has recently regained some stability and the local currency is gradually becoming more stable.