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The effect of oil price on macroeconomic aggregates in Ghana.
(KNUST, 2018-05) Abaidoo, Kwesi Yamoah
Oil price is arguably one of the key driving forces of macroeconomic aggregates and has been an area of interest by many in academia and industry in recent times. The study investigated the effects of oil price on macroeconomic aggregates in Ghana by employing annual time series data which spans from 1970 to 2016 from the World Development Indicator (WDI). The study considered macroeconomic variables such as real GDP, real effective exchange rate, real interest rate and unemployment. The VAR model was employed for the study and ADF test revealed that the macroeconomic variables were not stationary at levels but at first difference. Johansen test for cointegration revealed the existence of a long run relationship, whilst the VECM was unable to establish a significant short-run relationship. Results from the study revealed that oil price affects macroeconomic aggregates negatively. The study recommends that Ghana should broaden its energy mix; adopt proper risk management strategies such as hedging and also implement policies and regulations that will ensure efficient use of crude oil to reduce the effect of oil price shocks.