Does the exogeneity of oil prices matter in the oil price-macro-economy relationship for Ghana?

Using annual data from 1971 to 2014 we consider whether the relationship between crude oil prices and the macro-economy in the relatively small economy of Ghana is affected by the treatment of crude oil prices as exogenous or endogenous. We use vector autoregressions, vector error-correction models, scenario-based dynamic forecasting, and autoregressive distributive lag specifications. There is little evidence that international crude oil prices have a significant negative effect on Ghana’s output in either the short-run and long-run, regardless of whether crude oil prices are treated as exogenous or endogenous. This implies that increases in crude oil prices do not put a binding constraint on the monetary authorities to loosen monetary policy to offset its adverse effect on output. If inflation is a priority, policy makers could focus on inflation stabilization by tightening monetary policy when oil prices rise.