Oil Windfalls in Ghana: A DSGE Approach

 
Author/Editor: Dagher, Jihad ; Gottschalk, Jan ; Portillo, Rafael
 
Publication Date: May 01, 2010
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: We use a calibrated multi-sector DSGE model to analyze the likely impact of oil windfalls on the Ghanaian economy, under alternative fiscal and monetary policy responses. We distinguish between the short-run impact, associated with demand-related pressures, and the medium run impact on competitiveness and growth. The impact on inflation and the real exchange rate could be moderate, especially if the fiscal authorities smooth oil-related spending or increase public spending’s import content. However, a policy mix that results in both a fiscal expansion and the simultaneous accumulation of the foreign currency proceeds from oil as international reserves—to offset the real appreciation—would raise demand pressures and crowd-out the private sector. In the medium term, the negative impact on competitiveness—resulting from ”Dutch Disease” effects—could be small, provided public spending increases the stock of productive public capital. These findings highlight the role of different policy responses, and their interaction, for the macroeconomic impact of oil proceeds.
 
Series: Working Paper No. 10/116
Subject(s): Demand | Economic models | Exchange rate appreciation | Fiscal policy | Ghana | Government expenditures | Inflation | Monetary policy | Nonoil sector | Oil production | Oil revenues | Reserves accumulation

Author's Keyword(s): Ghana | oil windfalls | fiscal policy | monetary policy | real exchange rate
 
English
Publication Date: May 01, 2010
Format: Paper
Stock No: WPIEA2010116 Pages: 36
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
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