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FINANCIAL SECTOR REFORM AND FINANCIAL SAVINGS IN SUB-SAHARAN AFRICA: THE CASE OF GHANA

Sam Q. Ziorklui and William Barbee Jr.
Savings and Development
Vol. 27, No. 1 (2003), pp. 63-78
Stable URL: http://www.jstor.org/stable/25830817
Page Count: 16
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FINANCIAL SECTOR REFORM AND FINANCIAL SAVINGS IN SUB-SAHARAN AFRICA: THE CASE OF GHANA
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Abstract

During the 1980s, Ghana has been one of many Sub-Sahara African (SSA) countries that have embarked on financial sector reform as part of its structural adjustment program to remove the vestiges of financial market repression in order to promote savings mobilization and increase credit allocation to the private sector. This paper provides an empirical examination of the impact of the policy reform on mobilizing private financial savings in Ghana. The results of this study show that the financial sector reform did not achieve their intended goal of enhancing private financial savings. The study shows that the inflationary pressures in Ghana resulted in negative real deposit interest rates and as a result, the savings response has been weak. A major lesson from Ghana's experience is that financial sector reform undertaken in countries with high inflationary pressures has a reduced chance of increasing savings mobilization. The study recommends government policies to reduce inflation and provide a stable financial and macroeconomic environment for savings mobilization.

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