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Oil Price Fluctuations and it Impact on Economic Growth: A Dsge Approach

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  • Eric Amoo Bondzie
  • Giovanni Di Bartolomeo
  • Gabriel Obed Fosu

Abstract

Ghana is poised to be one of the fastest growing economies in Sub-Saharan Africa because of its emerging oil and gas industry. Ghana’s discovery of oil in commercial quantities in 2007 and its commencement of production in 2010 are expected to have an impact on the economy. To investigate these, we estimated a dynamic stochastic general equilibrium (DSGE) model based on the features of the Ghanaian Economy. We then examined the persistent effects of world oil price and monetary policy shocks (money supply-interest rate induced) on economic growth in Ghana. We realized that, a shock on interest rate leads to a sharp fall in prices which reflects the impact of the decrease in interest rate on the marginal cost. There is a paradoxical effect of a negative interest rate on total money supply. We also showed that a positive output shock has the same effect on consumption, investment, prices and wages as in the case of interest rate shock.

Suggested Citation

  • Eric Amoo Bondzie & Giovanni Di Bartolomeo & Gabriel Obed Fosu, 2014. "Oil Price Fluctuations and it Impact on Economic Growth: A Dsge Approach," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(2), pages 217-242, February.
    • Handle: RePEc:hur:ijarbs:v:4:y:2014:i:2:p:217-242
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    2. Takyi, Paul Owusu & Leon-Gonzalez, Roberto, 2020. "Macroeconomic impact of fiscal policy in Ghana: Analysis of an estimated DSGE model with financial exclusion," Economic Analysis and Policy, Elsevier, vol. 67(C), pages 239-260.
    3. Ibrahim, Taofik, 2018. "Oil price Fluctuation and Aggregate Output Performance in Nigeria," MPRA Paper 88636, University Library of Munich, Germany, revised 12 Apr 2018.
    4. Pazouki, Azadeh & Zhu, Xiaoxian, 2022. "The dynamic impact among oil dependence volatility, the quality of political institutions, and government spending," Energy Economics, Elsevier, vol. 115(C).

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    More about this item

    Keywords

    DSGE model; Ghana; Interest rate; Output; Oil Price;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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