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

George Tweneboah () and Anokye M. Adam

MPRA Paper from University Library of Munich, Germany

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: Oil price shock; cointegration; vector error correction; impulse response (search for similar items in EconPapers)
JEL-codes: E31 E52 Q43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr, nep-cba, nep-ene, nep-mac and nep-mon
Date: 2008
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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:11968

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