The Impact of Oil Price Changes on Inflation in Ghana
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Date
2015-07
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Publisher
University of Ghana
Abstract
Ghana still depends largely on imported crude oil to meet its crude oil needs since oil is an integral part of her economy. This dependency makes most macroeconomic indicators such as inflation of the Ghanaian economy vulnerable to fluctuations in the world price of crude oil. This study therefore employed Vector Autoregression (VAR) to examine the impact of oil price changes on inflation in Ghana using monthly data from 1998 to 2013. Unlike previous studies on oil price inflation relationship conducted on developed countries, this study is done for Ghana as a developing nation.
The study aimed at finding the nature of the relationship between oil price changes and inflation in Ghana. To achieve this aim, it dealt with three main objectives .The study first estimated a relationship between oil price changes and inflation. The next objective was to determine the presence of asymmetry in the relationship. The last objective was to find the direction of causality and hence the transmission mechanism through which oil price changes might affect inflation.
The result indicates a positive effect of oil price on inflation in both the short run and the long run. The study reveals that in Ghana as a developing country, oil price increase results in higher inflation directly and through the exchange rate.
To reduce the inflationary pressure in Ghana, government should find a way to blunt this cost-push inflation emanating from oil prices.
Description
Thesis (MPhil) - University of Ghana, 2015
Keywords
Price, Oil Price, Inflation, Ghana