Implications of Oil Price Shocks for Monetary Policy in Ghana: A Vector Error Correction Model

Tweneboah, George and Adam, Anokye M. (2008): Implications of Oil Price Shocks for Monetary Policy in Ghana: A Vector Error Correction Model.

Abstract

We estimate a Vector Error Correction Model to explore the long run and short run linkages between the world crude oil price and economic activity in Ghana for the period 1970:1 to 2006:4. The results point out that there is a long run relationship between the variables under consideration. We find that an unexpected oil price increase is followed by an increase in price level and a decline in output in Ghana. We argue that monetary policy has in the past been with the intention of lessening negative growth consequences of oil price shocks, at the cost of higher inflation.

• Item Type: MPRA Paper
• Language: English
• Keywords: Oil price shock, cointegration, vector error correction, impulse response
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy

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