Munich Personal RePEc Archive

Oil Price fluctuations and it impact on Economic Growth: A DSGE approach.

Di Bartolomeo, Giovanni and Bondzie, Eric Amoo and Fosu, Gabriel Obed (2014): Oil Price fluctuations and it impact on Economic Growth: A DSGE approach. Published in: International Journal of Academic Research in Business and Social Sciences , Vol. 4, No. 2 (February 2014): pp. 217-242.

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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.

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