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

20 Pages Posted: 7 Dec 2008

See all articles by George Tweneboah

George Tweneboah

University of Leicester - School of Management

Anokye M. Adam

University of Cape Coast - School of Business

Date Written: December 6, 2008

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.

Keywords: price shock, cointegration, vector error correction, impulse response

JEL Classification: E31, E52, Q43

Suggested Citation

Tweneboah, George and Adam, Anokye M., Implications of Oil Price Shocks for Monetary Policy in Ghana: A Vector Error Correction Model (December 6, 2008). Available at SSRN: https://ssrn.com/abstract=1312366 or http://dx.doi.org/10.2139/ssrn.1312366

George Tweneboah (Contact Author)

University of Leicester - School of Management ( email )

United Kingdom

Anokye M. Adam

University of Cape Coast - School of Business ( email )

Cape coast
Ghana

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