Assessing the Impact of Monetary Policy on the Financial Performance of Listed Commercial Banks in Ghana

Abstract

The Central Bank of a country usually implements monetary policies comprising various instruments and strategies used to regulate the money supply, interest rates, and overall economic stability. A study was steered to assess the influence of financial policies on Ghana's monetary performance. The study employed secondary data spanning 2012 to 2022. A quantitative research approach and an explanatory research design stayed employed. According to the research, the viable financial institution standing is positively and expressively influence by the financial institution’s open market operation. The open market operation for selling portray a negative substantial impact on the financial institution’s performance. The bank of Ghana rate likewise had a negative and statistically substantial effect on the profitability of viable financial institution. The reserve requirement proportion has a statistically significant adverse effect on profitability.

The study recommended that central banks should consider adjusting their OMO strategies accordingly and should consider doing so in a timely and gradual manner. Also, Central Banks should consider implementing counter-cyclical measures alongside their OMO strategies. Central Banks should provide clear and transparent forward guidance regarding their future interest rate decisions. Commercial banks can anticipate rate movements better and adjust their strategies accordingly, reducing uncertainty and potential negative impacts. Finally, central banks can use reserve requirement ratios as a countercyclical tool. During periods of economic expansion, they could raise the ratios to curb excessive lending and prevent overheating. Conversely, they could lower the ratios during economic downturns to encourage lending and stimulate economic activity.