Inflation dynamics in pre and post deregulation era in Ghana: Do petroleum prices have any influence?

Addae, Edna and Ackah, Ishmael (2017): Inflation dynamics in pre and post deregulation era in Ghana: Do petroleum prices have any influence?

Abstract

The study looks at the impact of price of petroleum prices on inflation in the Ghanaian economy in the pre and post deregulation era and associated direction of causality as well as the extent of pass through of high international petroleum products price to the domestic retail market. An ARDL model was applied on time series monthly data of various petroleum fuel prices as well as exchange rate.A pass-through formula use by Baig et al, (2007) was also applied. The results reveal that changes in LPG, Kerosene and premium prices have marginal impact on inflation. The pass through analysis revealed Ghana has not pass through more than 50% of increase price of international or import petroleum product of gasoline, kerosene and LPG to the ordinary consumers in the period of the study and this was lower in the post deregulation than pre deregulation. The study therefore recommends full deregulation to continue since it favours lower pass through of fuel price increase in the world market to ordinary consumers whiles may consider gasoline and premium price increase at the expense of kerosene and liquefied petroleum gas price if inflation is to be shielded from fuel price increase.

• Item Type: MPRA Paper
• Language: English
• Keywords: Inflation, Deregulation, Petroleum Prices, Ghana
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q31 - Demand and Supply ; Prices; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy

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Coady, D., Gillingham, R., Ossowski, R., Piotrowski, J., Tareq, S., & Tyson, J. (2010). Petroleum product subsidies: costly, inequitable, and rising. Washington, DC: International Monetary Fund

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del Granado, F. J. A., Coady, D., & Gillingham, R. (2012). The unequal benefits of fuel subsidies: A review of evidence for developing countries. World Development, 40(11), 2234-2248.

Doshi, Viren, and John Corrigan. '2015 Oil And Gas Trends'. Strategyand. forthcoming, Washington DC.

Danjuma, B.F.( 2012) An Analysis of the Relationship between Petroleum Prices and Inflation in Nigeria, International Journal of Business and Commerce Vol. 1, No.12: Aug 2012[01-07] (ISSN:2225-2436).

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Hossain, S. (2003). Taxation and pricing of petroleum products in developing countries: a framework for analysis with application to Nigeria.

Idris A. Sani. (2014). Impact of Petroleum Subsidy on SSB Performance in Nigeria. Journal of Economics and Sustainable Development. ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online) .Vol.5, No.22, 2014.

Institute for Fiscal Studies (2015) The Falling Crude Oil Prices: Mitigating the Risk; Policy Brief paper No. 1, January.

International Monetary Fund, 2013, Energy Subsidy Reform: Lessons and Implications.

Laan, T. (2010). Gaining traction: the importance of transparency in accelerating the reform of fossil-fuel subsidies. Available at SSRN 1594183

Monday, J. U. Downstream Deregulation Policy and Economic Growth: A Case of Nigeria. EDITORIAL BOARD Patron, 1. Okafor Loretta (2012). Deregulation Of The Nigerian Downstream Oil Sector; Keeping Faith With A Global Trend. http://www.pppra-nigeria.org/articledetails.asp?ArticleID=16.

Parikh, K. S. (2010). Report of The Expert Group on A Viable and Sustainable System of Pricing of Petroleum Products. Government of India.

Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of applied econometrics, 16(3), 289-326.

Sani, S.B. (2013). Effect of deregulation of downstream oil sector on selected macroeconomic variables in Nigeria. Paper presented at: Business and Social Science Research Conference, Paris, 20-21 December, 2013.

Totonechi,J.(2011) .Macroeconomic Theories Of Inflation, International Conference On Economics & Finance Research.