Investigating the impact of institutional quality under the petroleum price deregulation policy regime on the economic growth of Ghana

Abstract

The importance of institutional quality as a means of influencing economic growthis being given much attention. This paper examines the extent to which institutionalquality under the price deregulation policy in Ghana impacts GDP growth. Thestudy employs the Bayesian linear regression and the auto regressive distributed lag(ARDL) models in estimating a quarterly data that spans from the first quarter of2005 to the fourth quarter of 2022. We observe that an increase in petroleum pricesincreases GDP growth by 0.3 units in the long run while an increase in inflationreduces GDP growth by 0.6 units in the short run. Again, we observe that in theshort run an increase in foreign direct investment increases GDP growth by 3.24units. The interactions of petroleum prices and institutional quality on the otherhand reduces GDP growth in the short run by 0.91 but tend to increase GDP growthby 1.45 which is comparatively more than the decrease in the short run suggestingthat institutional quality under the price deregulation policy impacts positivelyon GDP growth in the long run. This paper has policy implications in that it offerspolicy makers, especially governments, the necessity to appreciate the importanceof institutional quality in the quest for implementing policies for desired growth.