Oil Price Shocks, Monetary Policy and Aggregate Demand in Ghana

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Oil Price Shocks, Monetary Policy and Aggregate Demand in Ghana

Author Info

Jumah, Adusei (Department of Economics, University of Vienna, BWZ, Vienna, Austria)
Pastuszyn, Georg (Department of Economics, University of Vienna, BWZ, Vienna, Austria)

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Adusei Jumah

Abstract

The current study examines the relationship between the world oil price and aggregate demand in a developing country, Ghana, via the interest rate channel by means of cointegration analysis. Results of the study indicate that oil price—by impacting the price level positively—negatively impacts real output. The results also indicate that monetary policy is initially eased in response to a surge in the price of oil in order to lessen any growth consequences, but at the cost of higher inflation. The ensuing higher inflation, however, prompts a subsequent tightening of monetary policy leading to a further decline in output. In addition, output does not revert quickly to its initial level after an oil price shock, but declines over an extended period.

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Paper provided by Institute for Advanced Studies in its series Economics Series with number 212.

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Length: 19 pages
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:ihs:ihsesp:212

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

This paper has been announced in the following NEP Reports:

NEP-AFR-2007-06-23 (Africa)
NEP-ALL-2007-06-23 (All new papers)
NEP-CBA-2007-06-23 (Central Banking)
NEP-ENE-2007-06-23 (Energy Economics)
NEP-MAC-2007-06-23 (Macroeconomics)
NEP-MON-2007-06-23 (Monetary Economics)

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