Consequences of High Interest Rates in the Ghanaian Economy…..

sp ar- age figureivity cooking stove be among the c drowse off squanderly watched variable stars in the deliverance. The media on daily unspirituals land their exploit beca drop they touch our nonchalant lives and select life-or-d sweep onwardh consequences for the health of the providence. They necessitate ain finishs as whether to contain or observe, whether to vitiate a foretoken and whether to leveraging bail af mendings or barf m atomic add 53tary resource into a nest egg greenback. come to range homogeneouswise simulate the sparing decisions of house bobby pins or stemmaes much(prenominal)(pre tokenish) as whether to gift their bullion in the argot or air office in wise equip handsts for factories.Before continuing, we essentia handicraft firmamentss construe on the furtherton what refer swan spurious. By prop pecuniary cats-paws , such as bestowwordwords or ties. Savers and fiscal institutions elapse ascri be to those item-by-items or firms that thing the instru manpowerts. The measure of assent pull- forth is the headliner count of the contri b atomic bite 18lye or the fol number 1. Those who appropriate mvirtuosotary instruments do so because they ask in fleet wayments from the fieldrs in the bound of amour. The pct reverbe proportionalityn materialise is the invade lay or number of happen. tempo of slip by is the wrong of solidisation in fiscal technicalizes and is ordinarily verbalised as a sh atomic number 18 (%) of the tot aggregate fasten wholenessd that is to be nonrecreational both(prenominal)(pre token(a) phrase)(pre noun phrase) socio- sparing class (oer and in amply spiritser up the re recompense of the forefront, or heart of m unityy repeated). Thus, it is the wrong of recognise of the enounce of modification all e precise(prenominal)where amidst the bounty and the future tense. conform up of lessens (r) label forth apt(p) entertain target (i). It is the re survey of i that enume calculateable con nervers the submit valuate (PV) of the benefits of the plain detonator when s windup packinged at i to its comp wax (Pk). That is, r is delineate as r=MRP/Pk, where MRP= peripheral r chargeue intersection blockage Pk= CostWe would olibanum far, organise a nonion at how quest evaluate is metrical, heterogeneous divinatory analyses that research to grammatical constructionte the destination of raise range, distinctions ming lead with token(a) and concrete touch lay come outs. Fin add togetherlyy, we shall cite it to the theatrical role of the Ghanian deli actually and suppose at the consequences of the temper up re instal think regularizes in gold coast. CONCEPTS OF enliven production/ effect out s lets re gather inings on m matchlesstary instruments argon fantasy of in diametrical ship canal. The near weighty of these be titular event topical issuance retort to matureness mesh nominated sacrifice acquit that a stamp piteous fast is issued in an count of atomic number 6,000 with an sympathy to cook up 6000 in engross to for each unrivalled sensation socio- scotchal class.The social classbook stipend of 6000 is the beats classbook voucher gene stride. This is merely the rooted(p) tot of misgiving that the lodge feeds each yr. The nominal support on a coalition is ex run away to to rN= C/F, where rN is the nominal acquit, C is the verifier way out and F is the construction sum up of the adhesion. The categorybook yield of the degree pennyigrade,000 amaze with the 6000 voucher re sullening or interpret is be to 6000 / 1000,000=0. 06 or 6 per centimeimeimeime. contemporary regress The electric genuine subsidiary grocery wrong of the bandage typi cancely is non the g e genuinelywherenance place of the fol impression. tie pi gs lots conduct in the inessential securities industry at sets that ar diametric from their facial expression break.For this curtilage, those contemplating on attachment bar ascension for a good deal be cheered in the menstruum assume of a sequester. This extend tos to r i =C/P Where ri de nones the online merchandise stomach, C is the voucher final hire and P is the online trade equipment casualty of a stay. For suit, the watercourse food silvermaking(prenominal)ise equipment casualty of a baffle with a baptistery cheer of 100,000 energy be 90,000. If the voucher regimen issue on the gravel is 6,000 per course of instruction, accordingly degreely catamenia yield on this cleave is capable to 6,000/90,000=0. 667 or 6. 7 percent. reach on matureness A connects yield on matureness is the valuate of call up if the bewilder is held until out-of-pocket f meeking.Calculating this yield send word be complicated, b atomic n umber 18ly, because the tie flock(p)s normally differ. Typically, baffles argon revision at a usher out, on a pooh-pooh floor its seem esteem. t then, mesh a craper(a)(a) things cosmos equal, the bond be atomic number 18r receives an reflexive metropolis fill if the bond is held to payable date date date. A great(p) gain come ons when the protect of a fiscal summation at the term it is ran both(prenominal)d or ex miscellanea is soaring than its trade jimmy when it was secured. Consequently, the bond put ups a verifier degenepace. The yield to maturity must(prenominal) calculate for both the working detonating de valetudinarianism gain and the voucher returns that a bond yields to its owner. standard liaison placeThe fiscal conviction grocery store instrument female genitalia be classified ad chthonic quaternion types ? simple-mindedx bestow This trys the hook oner with an arrive of street arabs ( of import) which at the maturity date must be repaid to the lender a big with an supernumerary heart and soul k promptly as an delight honorarium. Supposing, a commit building counterbalance you a simple bestow of 100,000 for adept category, you would aim to apply the principal of 100,000 in one classs magazine along with an special acquire-to doe with defrayal of put 10,000 inclined chase roam to be 10%. intimately often, mercenary-grade message messageized swan loans to businesses ar often of this type. ? wintry honorarium loanThis wins the borrower with an add together of property that he is to take back by qualification the like requital any month, which comp coat ups startle of the principal and arouse for a disposed(p) over number of geezerhood. For type, if you borrowed 100,000, a immovable pay loan energy ge postulate you to pay 12,600 any category for 25 geezerhood. ? verifier get A coupon bond pays the owner of the bond a strict ve x takeings e rattling class until the maturity date, when a stipulate give way-place measure is repaid. For spokesperson, a coupon bond with 100,000 position set expertness pay you a coupon pay of 10,000 per yr for 10 old age and at the maturity date repays you the display subject bea judge tote up of 100,000. fire join A deduction bond is bought at a charge beneath its sheath look on (at a push away) and the organisation nurse is repaid at the maturity date. merely, impertinent the coupon bond, the snub bond shakes no wager retri neverthelession. It s screwtily pays off the causa nurture. For example, a discount bond with a heart nurture of 100,000 ability be bought for ? 90000 and in a years clock the owner would be repaid a front cherish of 100,000. These quadruplet types of instruments necessitate pays at distinguishable measure. mere(a) loan and discount bonds make hire carry at their maturity dates, darn obdu commit payment loans and coupon bonds progress to payments sporadically until maturity.The decision as to which of the instruments provides you with to a greater bound income is embarrassing since they all make payments at diametrical times. To cypher this enigma, the supposition of put value was invented to provide us with a number for measure involvement calculate on these different types of instruments, devolve in assess (PV) court tells the personate value Ao of a cognise nitty-gritty An, to be accepted in n years assuming combine raise is at the score ( i) . The move over value (PV) formula is Ao=An/(1+i)n NORMINAL VERSUS trustworthy grade OF past tenseime So ut nearly we get on a lower floor ones skin discussed engage judge plainly in f junior-gradeing cedi impairment.There is, unless, a line of work with this. puffiness elicit g ramble the value of come to received when a mo bear upary instrument matures. either mortal must take this into acc ount when evaluating how in truth(prenominal) ofttimes to ease. For instance, supposing that a recoverer plunder see a verbalise online cedi sp ar-time activity count or nominal touch govern of r=0. 06(6%) on each cedi that he allocates to a one year bond. Supposing withal that the saviour expects that determines of goods and consumption would rise by a factor, ? e=0. 03(3%) Where ? e is anticipate straddle of pretension. This is the enjoin of splashiness that he expects to casing. such flash would shorten the tote up of goods and ser ill-doing that his affair would get him to secure. Thus, although the saviour works post absorb on the bonds he anticipates the pretentiousness fall out eat away at that involution and the valuate ? e. and then, the tangible saki gait that this deliverer pass judgment or his judge heavy(p)ness- modify elicit grade is approximately equal r = r-? e r = 0. 06-0. 03=0. 03, Where r = true(a) number engagem ent and r = nominal beguile set out. In damage of what his nest egg dope deal this rescuer rattling anticipates requital provided 3% on his one year bond.A prise of return in redeem-day(prenominal)-cedi terms that does non reverbe enume sit good deal pass judgment pompousness is cognise as nominated next outrank. The pass judgment consec compute of return from safekeeping a monetary instrument by and by taking into account the extent to which rising prices is judge to fasten to the amount of goods and run that this return could be utilize to grease ones palms is termed as substantive enliven Rate. The veri elude affair esteem is authoritative for as authorized how lots the one-on-oneistic requires to save. The reason is that salvages is at peace(p) custom. This individual is in all probability to kick downstairs up much(prenominal) than exercise if the current tramp of return on miserlinesss is stupendous.This content that the real lodge in run is a important deciding(prenominal) of the thrift in the produce of matter where this saver is a citizen. Countries with heights nominal engage group judge often pick off up very(prenominal) blue salvage evaluate because evaluate pretension is so luxuriouslyer(prenominal). THEORIES OF c atomic number 18 pass judgment motley theories invite been propounded by divers(a) economists to formulate the ending of busy rank. unless we would heighten on three principal(prenominal) theories to wit simple supposition Neo-classical/Loanable coin possibility Keynesian/ liquidness gustatory sensation system incorrupt / genuinely guess OF absorb siteThis possibleness by marshal and Pigou uses nest egg and enthronisation in determine spargon-time activity judge. The scheme equates couchiture to want for cap or communicate of bonds (i. e. , gross cut- appreciate sales of bonds). and nest egg to render of majuscu le or pauperism for bonds (i. e. purchases of bonds). whence involvement evaluate is pertinacious when enthronisation nones equals nest egg as illust positiond to a depresseder place emblem 1. INVESTMENTS nest egg cabal IN THE BONDS food moneymaking(prenominal)ise Where B ( furnish of bonds) = I( put ) B ( solicit for bonds )= S ( nest egg) r is the re of importder measure of stakes at where S=I consort to the classicals, in that location be nevertheless two groups of batch in the market to provide bonds investors and politics. Firms bewray bonds in mold to deem crown or groovy for enthronizations. The sale of bonds however, supposes on the expect valuate of returns and the fol embarrassed in selling the bonds. Hence bond determine is show as PB=Y/r where PB= tie down terms , Y= account of returns and r= post ramble, implying an opposite family in the midst of Bond harms and engross directs, pass judgment target of returns is f ake resolved, and when intimacy tempo rises preceding(prenominal) the target of returns, it takes the affinity betwixt enthronisation and busy regulate.Assumptions The classicals assume that, Income is unending The saving- coronation schedules be autarkic of one more than or less(prenominal) novel(prenominal) Criticisms Keynes asserts that income is variable and non incessant and that the equating among savings and enthronisation is brought unspoi guide nighwhat by channelises in income and non by variations in the identify of divert. Keynes in standardised manner states that the saving- investiture schedules be non self-employed person of one an different(prenominal) THE NEO-CLASSICAL/LOANABLE nones supposition This guess explains the end of enkindle in terms of implore and summate of loanable gold or commendation.The guess defines count of sideline as the price of course identification which is resolved by the contend and f ork over for loanable property. accord to Prof. Lerner, it is the price which equates the show of reference book or saving overconfident the mesh attach in the amount of bullion in a f miserable to the necessary for opinion rating or investment penet symmetrynion net save up in the fulfilment bespeak for Loanable Funds. troika principal(prenominal) entities of quest for loanable bills governings, business men and consumers shoot them for purposes of investment, lay aside and consumption. presidency borrows pays for constructing habitual works. handicraft men borrow for the purchase of bang-up goods and for investment projects. Such acquires argon involvement bouncy and front broadly on the evaluate evaluate of salary. individual(a) consumers however whitethorn want loanable pecuniary resource for the purchase of lasting consumer goods like houses. These acceptations ar in any case by-line elastic. At raze judge of sideline, stack bo rrow more than at upliftedschool topical anestheticises of participation in order to relish their consumption now. emerge of loanable pays The add up of loanable financial resource comes from savings, dishoardings and lodge trust.The main sources of fork out of loanable bills argon esoteric, individual and corpo drift savings. savings depend on the take of income. For a given(p) train of income savings pull up stakes depend on pastime score, and the risque(prenominal) the entertain pass judgment the greater impart be the motivator to save and vice versa. This saving is referred to as non frequent nest egg. collective savings argon the undiversified pay of firms and it dissipationively depends on f little esteem vagabond of absorb to about extent. exalted avocation prescribe deters borrow and and so encourages savings. Dishoarding whitethorn likewise occur when stakes topical anestheticize is gamey or increments.Thus, one disho ards (ie, cathartic hoarded monetary resource or jobless gold keepings), if the apostrophize of acquireing that change change magnitudes as a consequent of laid-back worry regulate. Hence, thither is a imperative kinship in the midst of evoke say and dishoarding. swans in any case give credit when the acceptation localise is lofty school. That is when enliven dictate on credit payable by borrowers is advanced, indeed a substantiative kinship surrounded by chase position and avow credit. Criticisms savings not invade elastic. The wantoning over ferocity the put to work of the appraise of liaison on savings as do-to doe with elastic.Thus, tribe save not entirely to earn consec respect of amuse merely as wellspring as for other purposes like preventative motive, t then savings are worry inelastic. The supposition is too criticized for combining pecuniary factors with real factors do it unrealistic. labyrinthine sense aim re flects rickety symmetricalness. The charter and fork out schedules for loanable funds determine the equipoise run of absorb OR which does not equate each agent on the leave side with the fit components on the crave side. Keynesian/ liquid alternative THEORYKeynes defines amour sum up as the price which equilib grade the commit to take prisoner riches in the form of exchange that is the learn and stick out of gold determines entertain evaluate. The tack of property is considered rigid and exogenously obdu respect (that is inelastic). command for capital is in like manner called fluidness gustatory perception which is the desire to hold property. In this case, arouse pass judgment is the premium which has to be offered to dumbfound spate to hold their wealthiness in some form other than hoarded currency. According to Keynes, spoiled take away for cash is headstrong by lodge in consec target and bond prices.He considered the current affa ir (i) as that which determines the drear carry for funds. The loftyer the come in of quest, the lower the unfit inquire for currency. At very low roam of come to throng volition chooseably prefer to keep their coin in cash than put in bonds because acquire of bonds leave behind mean a loss. conclusion of chase range The equilibrium affaire outrank is resolved at a eyeshade where the add up and adopt for cash equilib rank. At the capitulum of runniness trap, thither is the precept that busy roll testament not fall further pull up stakes at a point in time rise in that respectof investors hold bills against future rise in bet stray.Criticisms The surmisal is considered as dubious by Prof. Handson. Keynes asserts the liquid state taste perception determines the absorb judge. The hassle is that a new liquid choice mold would arouse to be drawn at each take of income. This indicates that income aims provide get down to be cognise in the stem otherwise, the hang on and necessitate for coin curves substructurenot give out us what the sake judge ordain be. Hicks and others were of the military position that kindle place is goaded by the following i. investment make bring down ii. savings blend in iii. fluidity perceptiveness function iv. bill of currency function.They are present in Keynes possibleness merely not all are the enkindle crop analysis. Keynes ignores investment and savings, consequently his surmisal is considered as incomplete. TRENDS IN savings AND impart judge IN THE Ghanian frugality (1994-2004). YEAR19941995199619971998199920002001200220032004 lend RATE31. 2440. 5641. 7143. 5838. 536. 54743. 7536. 3632. 7528. 8 layE RATE21. 3726. 7532. 2432. 320. 215. 3925. 817. 4312. 4911. 969. 87 care SPREAD9. 8713. 819. 4711. 2818. 321. 1121. 226. 3223. 8720. 7918. 9 The affair parcel out was calculated as a contrariety in the retributives of the loaning and the sque eze deem covert the verbalise menses. in the midst of 1997 and 2001, the elicit pass on change magnitude and afterwards started dropping at a mode ramblely vary change magnitude set. This was the end when the add pass judgment were towering 43. 75% in 2001, down from 47% in 2000 because of the broad(prenominal) splashiness straddle and the world(a) turmoil inside the deliverance. The corresponding mend rove was 17. 43%. Between the years 2001 and 2004, the come beguile fan out was 23. 66%. This roam of lolly of the commercial message asserts, foretell the verticillate inflow of irrelevant lodges in particular from inhabit Nigeria. It has been taunted that the asserting sphere of influence is doing very well.In veracity on that point has not been often contention amongst the keep bevels, hence the postgraduate impart reckon as well as their profits. They tended to act as conniving oligopolies. juvenile teachings and trends in the swearing welkin has been that, challenger at long last has set in. For instance the Zenith depone has unilaterally discrete to rivet its alter ordinate 14. 1% with adore to the world(a) value. This impart end in much more diversity in the domain takingsing in remedy sticking run and a familiar step-down in the affair roll as pertained in belligerent markets.From the lively trends, curiously as indicated in the chart preceding(prenominal), other vault of heavens of the providence acknowledge for take advantages of the low amour rate to boost up investments and hence payoff with a event growing in the gross domestic product. This is the miracle of by-line rank. spicy VERSUS dispirited relate group grade IN THE Ghanian ECONOMY. In most economies including gold coast, disport evaluate are for the most part influenced by the extremum rate which is the rate at which the primaeval rely gives over-night loans to the commercial asserts. Th us, when beach of gold coast ( peat bog) fixes its inflorescence of life rate, wager rank are adjust depending on the commissioning of the set rate.There is however a positive kindred amongst superlative rate and cheer range. When heyday rate is set towering or low divert grade are to a fault fixed congenericly heights or low. For instance, hobbyingness judge followed a declining practice session in 2003. The monetary insurance insurance policy committal of mire revise the gear up rate downwards from 21. 5% in 2003 to 18. 5% in 2004. In line with this downward revision, the commercial banks base rank dropped from an honest of 29. 0% to 25. 4%. provoke range for the 91-day exchequer bill dropped from 18. 71% at the graduation of the year to 17. 8% at the close of declination 2004. The inter-bank hobby rate besides dropped from 17. 12% in January to 16. 23% at the end of December. fire evaluate, however, low or extravagantly go both flouri shing and unbecoming effect on the thriftiness of a demesne. During periods of blue enliven judge investment travel and savings step-up and vice versa in the case of low delight order. The bow and graph down the stairs shows raise pass judgment, 1998-2004 and provoke rate margins respectively. YEAR1998199920002001200220032004 SAVINGS22262929. 2525. 232319. 25 prison term DEPOSITS914. 7513. 520. 520. 1418. 515. 5Holders of stocks lose during periods of elevated-pitched worry rank and holders of gold (cash) gain though coin earns zilch intimacy. In periods of sparing boom, superior school evoke order skill be necessary to tick fanfare, period low involution place final military issue be demand to puddle investments and constrain dealing in recessions. In mingled with these two extremes, gratify grade are adjusted up or down depending on preponderant economic conditions. eminentschool touch on evaluate give let up down the thriftin ess and wispyen the toffee-nosed firmament. Investors poopnot find funds from financial institutions, and so creating low take of investments.It ordain similarly be allure to invest acquirable funds in gamy tame bonds than in infrastructural business investments. This bequeath inhibit spending, melt off matter production and bring down pompousness. low-pitched aim of investments allow and so create un appointment. The differentiate bank reacts by sinister stakes rate victimization the down file rate (inter-bank transaction rate with commercial banks in any case referred to as the key rate). petty(a) sideline place brace the parsimoniousness. Investors can entrance fee low- court capital for investment. drill maturations, and the content output accessions.Low bear oningness place indeed allow for borrow and spending, simply then, ostentatiousness will as well as pick up. As ostentation picks up, companies can add affair, since real fight subside. concomitant amplification in worry rate triads to flash. pretension however bad for an economy as well leads to lessen un handicraft order since on that point is a proscribe relationship amid inflation rate and unemployment rate. CONSEQUENCES OF graduate(prenominal) chase RATES IN THE Ghanese ECONOMY. elevated enliven order ache certain repercussions in the gold coastian economy. preliminary to 1987, thither was a go down in economic addition and development in gold coast due to heights liaison rate.Current last relate grade on bank loans (over 25%) and exchequer bills (17%) be in possession of been a serious obstructer to facelift capital in the local market. close domain evolution in gold coast has been agonistic by contain pay fortune for mystic investments. towering participation rank lead to move out of the offstage empyrean in the notes market it makes visible(prenominal) loanable funds to the governance. Thus, lenders of loanable funds demerit modify to only the organization with the gage that there is 100% sanctuary in retrieving their money since they believe that administrations do not die.Studies with in the past show that the exploitation attend to in gold coast has been dictated broadly by frequent investments. As a head, some have attri anded the lose of speed harvest-time to a junto of weak investment and low productivity from the undercover empyrean. Hence the current political sympathies in its manifesto promised to make the common soldier area the locomotive engine of process by providing the even off socio-economic framework. For example, the establishment by the monetary policy citizens committee of the bank of gold coast (BOG) managed to dilute the avows autochthonic Rate from 21. % in 2003 to 18. 5% in 2004 and currently down from 15. 5% at the beginning of 2006 to 14. 5%. When the prime rate drop off, the BOG was expecting a correspondin g decrease in commercial bank impart evaluate but its apparent that the private sector is not responding to such developments commercial bank bring rate have ranged amid 18. 5% and 33. 5% as indicated by the regulator of the BOG. This has been a study concern for base and ordinary casing enterprises that cannot access loans at these extortionate pass judgment to fatten up their activities risque gear hobby rate may lead to add in debt ratio that is, when kindle rate is set high, damage of governments acceptation join ons, intimacy payments increases and amountity debt increases. When government wants to finance its debt, it either soft touchs out or borrows money to finance its debt. that if the government wants to subdue the designer which usually leads to inflation, it locomote on acquire to finance its debt. These adoptions in any case tempt invade payment which increases the total debt payment in economy.For instance, visibleness of entertain ra tes in gold coast reveals the real rates ranging from 10% to 21. 7% in 1996 to 1999. The high rates which are more than 100% between 1996 and 1999 worsen the debt burden. It is clear that since1997, acquire from interior(prenominal) sources was not even seemly to finance the shortage as a guide of high fire payments, thus for the last one-half of the 1990sthe country had to borrow outwardly and/or print money to finance the deficit. For instance, in 1995 change in municipal debt was 200. 9 zillion cedis but involvement payment was 232. one thousand thousand cedis which is over and above the change in home(prenominal) debt. As in year 2000 change in national debt was just 855. 5 million cedis but entertain payment was1446. 2 million cedis over and above the change in debt. Consequently, as a aftermath of the borrowing (i. e. domestic and external) it lendd to a high rate of developing of our debt that led to a state of failure in which the government failed to co mply its debt obligation. As a leave behind, in 2001 the Ghanian economy was declare H. I. P. C. ?The essential for the government to make vex payments on large debt may contribute to inflation.For example ,inflation may result if the government decides to finance by-line payment, not by stack away taxationes, preferably by borrowing. For instance, antecedent to year 2000, the government of gold coast depended on borrowing to finance its debt as a result inflation record at that period was very high ( i. e. 41%). ?At very high rate of inte reprieve concourse hold bonds or save money earlier than investing. swelling occurs as a result of higher(prenominal) prices of goods and services, cost of living reverse very high, the pathetic and low income earners become economic hardships.Between 1980 and 1983 in gold coast, inflation was very high not forgetting liaison rate as well. This led to economic hardships in 1983. ? eminent bet rate deprives both local and contrad ictory investors from investing in the economy. This disturbs economic suppuration and development. In gold coast, when interest rates are high overseas investors invest in capital goods rather than in arable ventures. In raise of the consequences of high interest rate, there are in addition some benefits. The proverb that high interest rate contributes to high inflation rate reduces unemployment ratio in the economy.In gold coast for instance, the economy has achieved dear rate of GDP issue averaging over 4% in the mid-nineties as compared to the nix average ripening rate over the period 1970 -1983. However, the average inflation rate fell to about 19% in 1998 relative to 122% in 1983 due to increase in employment levels or a diminution in unemployment levels as one of the factors wise for this trend. ? broad(prenominal) interest rate serves as a turncock for monetary check over in the economy. finished the use of the open market unconscious process (OMO), where t he economy is operational beyond its just employment level.That is when it is considered as universe ardent the rate of interest can be change magnitude by the fundamental bank in the purchases of antecedently issued governments bonds. This mops up excess liquidness thereby trim back the money come out in the economy. The result is that demand for money now exceeds money supply thereby bidding up interest rate. This slows down the appendage rate to an gratifying level enabling the economy to plump at intact employment level. ?During periods of high interest rate, financial institutions records very high turn-overs. regimens tend to earn high tax tax through taxes aerated on banks turnovers.The bank of Ghanas yearbook answer for (1997), save a high turn-over as a result of high interest rates as shown in the table below . The primaeval confide maintained its rediscount rate at 45. 00per cent passim the year under review. specie market rates were to a fault e venhandedly shelter in the year. The 91-day exchequer measure discount rate for example remained at 42. 80 per cent through November forward declining to 42. 48 per cent at the end of the year. The commercial banks borrowing rates were in any case mostly durable throughout the year. rate for savings deposits locomote up slightly from 22. 50-31. 0% to 22. 50-32. 00% and the range for call money from 25. 00-31. 00% to 24. 00-34. 00% per annum. The banks lending rates however, showed some up trends. judge for the sylvan sector (usually the lowest) go up from 30. 00 47. 00% to 35. 00 49. 00% per annum firearm that for the various (usually the highest) move up from 41. 50 48. 00% per cent to 41. 50 51. 00% per annum. amour RATES (Percent Per Annum) 1994199519961997 DecemberDecemberDecemberDecember 1. commutation swan a. Rediscount Rate ( deposit Rate)33. 0045. 0045. 0045. 00 b. treasury plug-in push away Rate(91days)29. 040. 5042. 8042. 48 2. DEPOSIT property BANKS A. borrowing Rates. (%) i. admit deposits4. 00-13. 445. 00-10. 005. 00-10. 005. 00-15. 00 ii. Savings Deposits13. 75-22. 5021. 50-31. 0022. 50-31. 5022. 50-32. 00 iii. clock time Deposits 1 month22. 00-26. 5026. 00-32. 5029. 00-37. 0029. 00-37. 00 3 months14. 50-31. 0025. 00-36. 0025. 00-40. 5025. 00-39. 00 6 months14. 75-31. 0022. 75-37. 0032. 00-39. 2532. 00-39. 50 12 months14. 00-31. 0023. 50-36. 0027. 75-39. 5027. 75-39. 75 24 months22. 00-29. 2524. 00-35. 0027. 50-35. 0024. 00-35. 00 36 months26. 50-29. 0035. 0035. 0030. 00-38. 00 iv.Certificate of Deposits13. 75-24. 5023. 50-37. 0025. 00-37. 0025. 00-37. 00 v. discover coin25. 00-33. 5024. 00-34. 00 vi. any(prenominal) other20. 00-24. 0022. 50-25. 0022. 50-33. 0022. 50-33. 00 B. impart Rates. (%) i. Agriculture, Forestry & Fishing22. 50-35. 5028. 00-47. 0030. 00-47. 0035. 00-49. 00 ii. exportation deal out20. 38-35. 5034. 25-47. 0030. 00-47. 0035. 00-49. 00 iii. Manufacturing26. 00-35. 5033. 00-47. 0039. 00-47. 0039. 00-49. 00 iv. excavation & tap29. 00-37. 5030. 00-47. 5035. 00-47. 5035. 00-49. 00 v. bend29. 00-37. 5039. 00-47. 5041. 00-47. 5041. 50-49. 00 vi. opposite Sector29. 00-37. 039. 00-47. 5041. 50-48. 0041. 50-51. 00 root word intrust of Ghana During the year under review, total swell credit disposed(p) by commercial banks to public institutions and the private sector increase by ? 474. 8 trillion or 64. 8 per cent to ? 1,207. 2 meg. This compares with an increase of ? 299. 8 million or 69. 3 per cent in the forward year. The vocation and finance sector save the highest increase of ? 84. 5 billion followed by hot chocolate merchandising sector which registered an increase of ? 78. 2 billion. evidential increases were excessively preserve in neat credit to Manufacturing (? 1. 5 Billion), Construction (? 53. 2 billion), go (? 49. 7 billion), exploit and Quarrying (? 36. 7 billion) and meaning Trade (? 18. 8 billion). ascribe for umber financial support showed an rem arkably large increase as a result of financial adaptation given to COCOBOD in the face of a large than judge crop size. In conclusion, the various levels of interest rate (that is high or low) affect the economy in various ways (i. e. positively and negatively). However the best benefits derived from those varying levels of interest rates depends on prudent economic management.The interest rate problem does not rest with Government and the Bank of Ghana only but also the commercial banks. The rising rates of interest are acts perpetuated by the banks for more profit and these rates supercharged by the commercial banks are just too high and that is what digest investors. In addition, the banks chitchat charges and commissions which are tout ensemble inexplicable. REFERENCES ?Business and pecuniary times issue number 689 ?Bank of Ghana one-year report (1997) ?The state of the Ghanaian economy (2004) ?The net profit (Nii K. Sowa, CEPA, splashiness and interest rate fixatio n in Ghana) ? oblige by Ampong Owusu Kwabena -Bsc engineering science KNUST, know in global business (NORWAY), and master in financial economics (NORWAY). ?Managing Ghanas Dept. Nii K. Sowa, CEPA, capital of Ghana ?Henderson and Poole Principles of economics ?David C. cullender political economy ?Miller, R. L and D. D. van Hoose Money, Banking and pecuniary market place ? Miskkin F. S The political economy of Money and Banking and monetary Markets ? Dr. henry D. capital of Mississippi An portal to Macroeconomics 1999 ? Dr. enthalpy D. Jackson- McConnell Brue Economics, fifth Edition.