Oil Windfalls in Ghana: A DSGE Approach

Abstract

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. 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.

Public Investment in Resource-Abundant Developing Countries

“…11 One way to further simplify the specification is to model the effects of a natural resource sector as foreign transfers that capture resource revenue flows (see, for example, Dagher, Gottschalk, and Portillo, 2012). By making explicit the natural resource GDP, however, the model can be calibrated to better match countries national accounts and fiscal data.…”

Optimal Economic Policy and Oil Prices Shocks in Russia

“…It highlights the importance of policy coordination with respect to the commodity shocks softening. Similar suggestion was made by Dagher, Gottschalk and Portillo (2012). Fiscal smoothing (stabilization fund) can help to stabilize the economy and improve welfare; however, pure Central Bank reserves accumulation without fiscal backing cannot guarantee macroeconomic stability.…”

“…In addition, oil revenues (received share from the export duty 1 ), interest rate revenues on funds assets, and change in the fund assets may be used by the government: If the oil revenues are used by the government and cannot be accumulated in the fund (the case before 2004), then as in Dagher, Gottschalk and Portillo (2012) we assume that…”

A Small Open Economy New Keynesian DSGE Model for a Foreign Exchange Constrained Economy

“…This attempt is constrained by the fact that there are only few empirical studies that are conducted on the economies of the region in a DSGE framework to see the range of parameters used (see Kose and Reizman, 2001;Peiris and Saxegaard, 2007;Dagher et al, 2010). Also, since the few studies that exist are meant to address quite di¤erent questions there are few parameters that they share in common with our paper which implies that there are few parameters to be borrowed.…”