Estimating the determinants of crude oil demand: evidence from Ghana

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July, 2015
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This study examines the determinants of crude oil demand in Ghana. Applying the vector error correction (VECM), the study isolates the long-run determinants of crude oil demand from the short-run using annual frequency data from 1980 to 2013. The results showed that real gross domestic product per capita, crude oil price, real effective exchange rate and time trend were the long-run drivers of oil demand in Ghana. There is the evidence of exogenous technical progress in the long-run. The study, based on the variance decomposition function (VDFs) and impulse response functions (IRFs) via the VAR estimates also found that positive shocks from real effective exchange rate had positive impacts on crude oil demand in Ghana. It is recommended that GNPC, NPA and TOR adopt a strategic oil demand security by establishing and sustaining a planned crude oil reserve system, shopping for alternative sources of energy. Bank of Ghana must also implement policies that strengthen the cedi against major currencies
A thesis presented to the Department of Economics, College of Humanities and Social Sciences in partial fulfillment of the requirement for the degree of Master of Philosophy in Economics,