Structural Transmission of Global Shocks to Domestic Inflation: A Structural Vector Autoregressive Analysis for Ghana

This study examines the transmission of global geopolitical risk (GPR), Global Supply Chain Pressure Index (GSCPI), and crude oil price shocks to domestic inflation in Ghana using a six-variable structural vector autoregressive model with recursive Cholesky identification, incorporating the monetary policy rate and covering the period from 2003Q1 to 2025Q2. Forecast error variance decomposition (FEVD) reveals that GPR is the dominant driver of headline inflation variability, peaking at 47.94% by period five and remaining at 37.81% by period 10, while GSCPI contributes 29.13% and the real exchange rate 11.62% at the same horizon. Own-shock innovations decline rapidly from 65.42% in period one to just 11.05% by period 10, confirming that external shocks overwhelmingly govern Ghana’s medium- to long-run inflation dynamics. Accumulated impulse responses show that non-food inflation exhibits the largest GPR response across all inflation components, peaking at approximately 13–14 percentage points, while oil price and monetary policy rate shocks exert limited and statistically insignificant effects. Policy recommendations include integrating GPR and GSCPI into Ghana’s inflation-targeting framework, prioritizing exchange rate stability, and investing in domestic food production to reduce import dependence. JEL Classification C32, E31, F41