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Oil Windfalls in Ghana; A DSGE Approach

Author

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  • Jihad Dagher
  • Jan Gottschalk
  • Rafael A Portillo

Abstract

We use a calibrated multi-sector DSGE model to analyze the likely impact of oil windfalls on the Ghanaian economy, under alternative fiscal and monetary policy responses. We distinguish between the short-run impact, associated with demand-related pressures, and the medium run impact on competitiveness and growth. The impact on inflation and the real exchange rate could be moderate, especially if the fiscal authorities smooth oil-related spending or increase public spending’s import content. However, a policy mix that results in both a fiscal expansion and the simultaneous accumulation of the foreign currency proceeds from oil as international reserves—to offset the real appreciation—would raise demand pressures and crowd-out the private sector. In the medium term, the negative impact on competitiveness—resulting from ”Dutch Disease” effects—could be small, provided public spending increases the stock of productive public capital. These findings highlight the role of different policy responses, and their interaction, for the macroeconomic impact of oil proceeds.

Suggested Citation

  • Jihad Dagher & Jan Gottschalk & Rafael A Portillo, 2010. "Oil Windfalls in Ghana; A DSGE Approach," IMF Working Papers 10/116, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:10/116
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    Citations

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    Cited by:

    1. Semko Roman, 2013. "Optimal economic policy and oil prices shocks in Russia," EERC Working Paper Series 13/03e, EERC Research Network, Russia and CIS.
    2. Huseynov, Salman & Ahmadov, Vugar, 2014. "Azərbaycan üzrə DSÜT modeli: qiymətləndirmə və proqnozlaşdırma
      [A DSGE model for Azerbaijan: estimation and forecasting]
      ," MPRA Paper 78123, University Library of Munich, Germany.
    3. Samuel Wills, 2014. "Optimal Monetary Responses to Oil Discoveries," CAMA Working Papers 2014-37, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    4. Dobronogov, Anton & Gelb, Alan & Saldanha, Fernando Brant, 2014. "How should donors respond to resource windfalls in poor countries ? from aid to insurance," Policy Research Working Paper Series 6952, The World Bank.
    5. Samuel Wills, 2012. "Optimal Monetary Responses to Oil Discoveries," Discussion Papers 1408, Centre for Macroeconomics (CFM), revised Apr 2014.
    6. Lahcen, Mohammed Ait, 2014. "DSGE models for developing economies: an application to Morocco," MPRA Paper 63404, University Library of Munich, Germany.
    7. Senbeta, Sisay, 2011. "A small open economy New Keynesian model for a foreign exchange constrained economy," MPRA Paper 29996, University Library of Munich, Germany.
    8. Senbeta, Sisay, 2011. "How applicable are the new keynesian DSGE models to a typical low-income economy?," MPRA Paper 30931, University Library of Munich, Germany.
    9. Fadia Al Hajj & Gilles Dufr??not, & Kimiko Sugimoto & Romain Wolf, 2013. "Reactions to Shocks and Monetary Policy Regimes: Inflation Targeting Versus Flexible Currency Board in Ghana, South Africa and the WAEMU," William Davidson Institute Working Papers Series wp1062, William Davidson Institute at the University of Michigan.
    10. SENBETA, Sisay Regassa, 2011. "A small open economy new Keynesian DSGE model for a foreign exchange constrained economy," Working Papers 2011004, University of Antwerp, Faculty of Applied Economics.
    11. Devarajan, Shantayanan & Dissou, Yazid & Go, Delfin S. & Robinson, Sherman, 2014. "Budget rules and resource booms : a dynamic stochastic general equilibrium analysis," Policy Research Working Paper Series 6984, The World Bank.

    More about this item

    Keywords

    Fiscal policy; Consumption; Monetary policy; Ghana; Oil Windfalls; Real Exchange Rate; inflation; central bank; foreign currency; aggregate demand; Open Economy Macroeconomics;

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