## Oil Windfalls in Ghana: A DSGE Approach

_IMF Working Papers, May 1, 2010_

## Source details

**Canonical URL:** [Oil Windfalls in Ghana: A DSGE Approach](https://www.imf.org/en/publications/wp/issues/2016/12/31/oil-windfalls-in-ghana-a-dsge-approach-23830)

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## Bibliographic details
- Authors: Jihad Dagher, Jan Gottschalk, Rafael A Portillo
- Published: May 1, 2010
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455200757.001

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### Summary
- Authors: Jihad Dagher, Jan Gottschalk, Rafael A Portillo
- Date: May 1, 2010
- Core approach: Calibrated multi-sector DSGE model to analyze likely impact of oil windfalls on the Ghanaian economy under alternative fiscal and monetary policy responses.
- Analytical distinction: Short-run impacts (demand-related pressures) versus medium-run impacts (competitiveness and growth).

### Short-run findings
- The impact on inflation and the real exchange rate could be moderate, especially if fiscal authorities smooth oil-related spending or increase public spending’s import content.
- A policy mix that combines a fiscal expansion with simultaneous accumulation of foreign currency proceeds from oil as international reserves—to offset the real appreciation—would:
  - Raise demand pressures.
  - Crowd out the private sector.

### Medium-term findings
- The negative impact on competitiveness (”Dutch Disease” effects) could be small, provided public spending increases the stock of productive public capital.
- The interaction of policy responses matters for the macroeconomic impact of oil proceeds.

### Policy implications and recommendations
- Smooth oil-related public spending to moderate inflationary and real exchange rate pressures.
- Consider increasing the import content of public spending to reduce domestic demand pressures on tradable sectors.
- Be cautious with a policy mix that simultaneously expands fiscal spending and accumulates international reserves, because this can amplify demand pressures and crowd out private investment.
- Prioritize public spending that increases productive public capital to mitigate medium-term competitiveness losses.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/oil-windfalls-in-ghana-a-dsge-approach-23830_