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

32 Pages Posted: 10 Feb 2016

See all articles by Eric Bondzie

Eric Bondzie

Catholic University of Milan

Giovanni Di Bartolomeo

Sapienza University of Rome, Department of Economics and Law

Gabriel Obed Fosu

Presbyterian University College, Ghana

Date Written: January 9, 2014

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.

Keywords: DSGE model, Ghana, Interest rate, Output, Oil Price

JEL Classification: C61, E31, E32, E52, O51

Suggested Citation

Bondzie, Eric Amoo and Di Bartolomeo, Giovanni and Fosu, Gabriel Obed, Oil Price Fluctuations and it Impact on Economic Growth: A DSGE Approach. (January 9, 2014). Available at SSRN: https://ssrn.com/abstract=2729833 or http://dx.doi.org/10.2139/ssrn.2729833

Eric Amoo Bondzie (Contact Author)

Catholic University of Milan ( email )

Largo Gemelli 1
Milan, MI Milano 20123
Italy

Giovanni Di Bartolomeo

Sapienza University of Rome, Department of Economics and Law ( email )

via Castro del Laurenziano 9
Roma, 00191
Italy

Gabriel Obed Fosu

Presbyterian University College, Ghana ( email )

Box 59
Abetifi
Okwahu
Ghana
00233205037203 (Phone)

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