Crude Oil Production and Macroeconomic Performance in Ghana

Abstract

This study investigated the impact of crude oil production on macroeconomic performance in Ghana. The study employed monthly data from January 2011 to December 2018. The structural vector autoregressive (SVAR) model was employed to analyse the impact of crude oil production on macroeconomic performance. The findings of the structural impulse response function revealed that crude oil production had no impact on the agricultural sector, manufacturing sector, services sector, real effective exchange rate and inflation. However, crude oil production had a positive impact on fiscal balance. The findings of the structural forecast error variance decomposition showed that crude oil production accounted for a small amount of variation in all the variables except fiscal balance for which it accounted for the largest portion of the variation. The study concluded that crude oil production had no significant impact on the non-oil sectors, real effective exchange rate and inflation. However, crude oil production had a positive impact on fiscal balance. The study recommended that the government through GNPC and major oil stakeholders such as Tullow Ghana Limited, Kosmos Energy Ghana and Anardako Petroleum Corporation should establish of oil refineries, petroleum industries and fertilizer plants domestically and also the development of the manufacturing and the services sector to provide the backward and forward linkages that needs to be shared between the oil sector and other sectors of the economy.