Journal of Economics and Management

Journal of Economics and Management
Volume 19, No. 1

March, 2023
Oil Prices and Economic Growth Nexus in Ghana: New Empirical Evidence
Mutawakil Abdul-Rahman
Department of Economics Ibn Haldun University, Turkey
Ayatullahi Seidu
Financial Economics Department Ibn Haldun University, Turkey
Mohammed Muntaka Abdul Rahman
Department of Economics Ibn Haldun University, Turkey
Murat Turgut
Department of Economics Ibn Haldun University, Turkey
The study aims to contribute to the oil price-economic growth nexus in Ghana by assessing the short- and long-run relationships with annual data that covers the period from 1987 to 2020. The study contributes to the literature by accounting for developments in the Ghanaian oil industry post-2012, including the discovery of the Tweneboa-Enyenra-Ntomme (TEN) and Sankofa Gye-Nyame (SGN) oil fields in 2016 and 2017, respectively, thus filling a massive deficiency in the literature. The Autoregressive Distributed Lag (ARDL) and the bounds cointegration test are used because they are appropriate for analyzing short- and long-run dynamics on a theoretical basis when time series are mixed-integrated, i.e., I(1) and I(0). The bounds test results indicated a cointegration relation between economic growth as proxied by real gross domestic product per capita and physical capital, labor force, oil prices, population growth, and government expenditure. The findings provide convincing evidence that the oil price is a significant driver of economic growth in Ghana. Both long-run and short-run impacts of the oil price are positive, statistically significant, and robust for the oil price proxy. The results suggest that because of the recent volatility of oil prices, economic policies should be concentrated on reducing overreliance on oil revenue to avoid the Dutch disease phenomenon. Nonetheless, policymakers should strategize well enough by encouraging more local participation in the oil sector to avoid the risk of falling victim to the Dutch disease.
Keywords:ARDL, Bounds Test, Economic Growth, Ghana, Oil Prices
JEL Classifications:C22, N97, O40.