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Oil Price Shocks, Monetary Policy and Aggregate Demand in Ghana

Author

Listed:
  • Jumah, Adusei

    (Department of Economics, University of Vienna, BWZ, Vienna, Austria)

  • Pastuszyn, Georg

    (Department of Economics, University of Vienna, BWZ, Vienna, Austria)

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.

Suggested Citation

  • Jumah, Adusei & Pastuszyn, Georg, 2007. "Oil Price Shocks, Monetary Policy and Aggregate Demand in Ghana," Economics Series 212, Institute for Advanced Studies.
  • Handle: RePEc:ihs:ihsesp:212
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    File URL: http://www.ihs.ac.at/publications/eco/es-212.pdf
    File Function: First version, 2007
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    Cited by:

    1. Wu, Man-Hwa & Ni, Yen-Sen, 2011. "The effects of oil prices on inflation, interest rates and money," Energy, Elsevier, vol. 36(7), pages 4158-4164.
    2. repec:rss:jnljfe:v3i2p1 is not listed on IDEAS

    More about this item

    Keywords

    Aggregate demand; inflation; monetary policy; oil;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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