The causative relationship between natural resource rent and economic growth: evidence from Ghana’s crude oil resource extraction
International Journal of Energy Sector Management
ISSN: 1750-6220
Article publication date: 5 January 2022
Issue publication date: 20 July 2022
Abstract
Purpose
While the relationship between natural resource rent and economic growth is well documented in the literature, not much robust analysis has been done to estimate the causative relationship between oil resource rent and economic growth in Ghana. This might be due to the fact that commercial production of crude oil started not long ago in Ghana. This paper aims to examine the causal relationship between oil resource rent and economic growth for the period of 2011 to 2020 in Ghana.
Design/methodology/approach
The study incorporates economic growth as a function of oil resource rent, non-oil revenue, foreign direct investment, capital and interest rate in a Cobb–Douglass production function/model. The study used four different estimation strategies including the autoregressive distributed lags model, Toda–Yamamoto test approach, nonlinear autoregressive distributed lags model and nonlinear Granger causality.
Findings
The main finding revealed that 1% increase in oil resource rent generates 0.84% increase in economic growth of Ghana in the long run. Contrary, the authors find an insignificant positive effect of oil resource rent on economic growth of Ghana in the short run for the period under study. The result from the Toda–Yamamoto test approach also showed a unidirectional causality running from oil resource rent to economic growth of Ghana, providing evidence in support of the resource blessing hypothesis in Ghana. The results are robust to two different alternative estimation strategies.
Originality/value
The causal relationship between crude oil resource rent and economic growth is examined.
Keywords
Acknowledgements
This manuscript benefited from the insightful and constructive comments of the three anonymous reviewers. We thank these anonymous reviewers for their time and effort. Our many thanks go also to the editorial board for their generous support and assistance during the review process.
Compliance with ethical standards conflict of interest: The authors declare that they have no conflict of interest.
Data can be accessed from the link below.
World-Bank (2020). World development indicators. http://datatopics.worldbank.org/world-development-indicators/. Washington DC: World Bank.
Citation
Adabor, O., Buabeng, E. and Fosua Dunyo, J. (2022), "The causative relationship between natural resource rent and economic growth: evidence from Ghana’s crude oil resource extraction", International Journal of Energy Sector Management, Vol. 16 No. 5, pp. 899-923. https://doi.org/10.1108/IJESM-06-2021-0007
Publisher
:Emerald Publishing Limited
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