CHAPTER ONE
INTRODUCTION
Background of study
The numerous needs of people in the society and the limited resources available pose a challenge on policy makers, firms, economists and individuals. Individuals, firms and economies have to therefore properly plan and order their needs in order to satisfy the most pressing ones.
Satisfying the needs of people in the society and a country at large is one of the most important responsibilities of governments in every growing nation. It is the prime duty of government and policy makers to create an environment and make policies that will achieve the aim of meeting the unlimited needs of people in the country.
In this global world in which we live, the success of an economy’s performance of all countries can be attributed to the performance of some macro-economic variables. Macroeconomics as a branch of economics is the study of the behaviour of the overall economy of a nation or a country. It looks at sections of the economy including the Gross Domestic Product, Inflation rate, Unemployment rate, growth rate, Consumer Price index, Interest rates and other factors.
Macroeconomic variables play an important role in the economy of every country. One can say that they control the economy. Particularly, three important macroeconomic variables that play significant role in the control of the economy are Gross Domestic Product (GDP), Unemployment rate and Inflation rate.
The gross domestic product (GDP) is one of the basic tools for measuring how an economy is performing over a period. It is determined by computing the market value of
all final goods and services produced in a country for a period usually a quarter or year. The GDP of nations change from year to year and some countries have higher GDPs compared to other countries. According to the World Bank in 2016, The country with the highest GDP was the United States of America with a total GDP of $18,569,100,000,000 followed by the People’s Republic of China with a GDP of $11,199,145,000,000. Ghana places 85th on the World Bank ranking with a GDP of $42,690,000,000.
Unemployment rate is the fraction of the labour force within an economy, which are not gainfully employed but are actively looking for employment. Ghana’s Unemployment rate has been fluctuating over time as population increases and as a lot more people graduate from tertiary institutions, the numbers keep increasing. Governments and political parties in opposition continue to suggest ways to create employment in order to stop the increasing rate of unemployment in Ghana. Unemployment rate in Ghana hit a high of 10.36% in 2000, 3.6% in 2006 and 5.766% in 2016 (World Bank, 2016).
Inflation rate is the percentage increase in the prices of goods and services overtime or the decline of purchasing power of money. In Ghana, the rate at which the prices of goods increase is a major concern for governments and citizens and there has always been a struggle to reduce the inflation rate to a single digit.
It is the priority of every state to manage the indicators of growth in the economy to create a stable and conducive economy for individuals, firms, economists and policy makers in the country. A higher rate of GDP, a lower unemployment rate and a lower rate of inflation are indicators of high economic performance in every country. A vice versa of the aforementioned; implies a decline or a fall in economic growth. A poor performance in these variables leads to unmerited redistribution of wealth in the case of high inflation rate. The unmerited redistribution causes money lenders to loose while their borrowers gain and
the same fate is suffered by employers while their subordinates gain and this is because usually loans and salaries are in monetary terms. A high inflation rate implies a loss in the value of money.
In terms of the unemployment rate, a high unemployment rate implies less disposal income to be invested into the economy and this in the long run will affect the economy of any nation.
Problem Statement
There is no well-known scientific way of monitoring targets set by governments. Governments make promises as they campaign to win elections but there are no scientific ways to the best of our knowledge of monitoring to see the execution of the promises once they assume office. The citizens and electorates usually wait for the end of the term of the government to assess whether the promises have been fulfilled or executed.
In the same way companies and organizations have some organizational structures that aid monitoring and evaluation once a project kick starts but usually there is no scientific way of modelling to monitor exact progress of targets set.
Most researches done on macroeconomic variables are more related to forecasting the variables, determining factors affecting these variables and the impact they make on economic growth but little has been done in the area of monitoring the performance of these macro-economic variables within an economy (Yergin & Stainslaw, 1997; Sumaila & Laryea, 2001; Ocran, 2007; Aziz & Azmi, 2017).
The little or lack of information available on performance monitoring of the variables creates a discontinuity in literature. This poses a challenge as to how to monitor variables such as GDP, Inflation rate and Unemployment rate within an economy.
