• Oil Revenue and Economic Growth Nexus: Further Empirical Evidence from Ghana using an ARDL Approach

    Author(s):

     Opoku Adabora and Emmanuel Buabengb


    adaboropoku@gmail.com
    2024-07-31 07:52:26

    66 Downloads 186 Views

    Abstract

    Theoretically, it is well argued that Oil revenue influence economic growth significantly. However, from empirical perspective less is known on how oil revenue affects economic growth, especially in developing countries like Ghana where the oil industry is young and non-competitive on the global market. The present study examines the effect of oil revenue on economic growth of Ghana using bounds test approach to co-integration within the framework of autoregressive distributed lag model (ARDL) as estimation strategy. Our ARDL estimates suggest that an increase in oil revenue generates a significant increase in economic growth of Ghana, implying that oil revenue boost economic growth. Other supplementary finding of the study reveals that non-oil revenue, capital and foreign direct investment (FDI) affect economic growth of Ghana positively while interest rate exerts a negative effect on economic growth of Ghana. Given these findings, our study provides a number of policy recommendations. First, there is the need for policy interventions such as increasing foreign direct investments that are directed to the oil industry or sector in order to increase oil production which will subsequently increase oil revenue to accelerate economic growth. Second, to promote economic growth, policy makers should design policies that aim at reducing interest and increasing capital and foreign direct investment as well as ensuring macroeconomic stability to boost investors’ confidence in Ghana’s economy. This will increase inflow of foreign direct investment to accelerate economic growth of Ghana.

    Keywords
    Oil revenue; economic growth; autoregressive distributed lag model; Ghana

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