Inflation dynamics and poverty rates: regional and sectoral evidence for Ghana

In this paper, we investigate the co-incidence of inflation persistence and poverty in a small open economy, using disaggregated data for Ghana. We initially employ various fractional integration (FI) tests for (a) the existence of long-memory and (b) an estimate of the degree of persistence, where present, in regional and sectoral inflation. Further, based on an analysis of poverty rates across districts and regions in Ghana, we determine where the adverse impacts of inflation persistence would, most likely, hit hardest. Using monthly inflation series for the periods 2005:08-2010:06 (for regions) and 1997:10-2010:06 (for sectors), we suggest that the poor in three out of the nine regional groupings and patrons of five out of the twelve sectors considered, will bear the brunt of any welfare-reducing impacts of inflationary shocks, particularly since three of the five sectors are basic necessities. Some policy implications are then discussed.