Do petroleum price fluctuations under price deregulation cause business cycles in Ghana?

Abstract

In the context of volatilities in the international markets in recent times, studies regarding the complexities of oil price fluctuations have focussed on analysing the special fluctuation characteristics of oil prices in different historical perspectives. This study examines the extent to which petroleum price fluctuations under the petroleum price deregulation regime impact on business cycles in Ghana. The study uses the autoregressive distributed lag (ARDL) model with a quarterly data spanning from the first quarter of 2005 to the fourth quarter of 2022. Our empirical results show that price stability impacts positively on economic growth, both in the short and the long run, while foreign direct investment also has a positive effect on economic growth in the short run. Again, we observe that increases in inflation rate and government petroleum revenue negatively affect economic growth both in the short and the long run. To the best of the authors’ belief and knowledge, the observations and recommendations made are consistent with theory and empirical studies and contribute immensely to the discussions about price asymmetry and business cycles. It also offers a nuanced perspective on how policy makers can enact policies that ensure efficient and effective deregulation and price stability.