The causative relationship between natural resource rent and economic growth: evidence from Ghana’s crude oil resource extraction

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.

India’s Total Natural Resource Rents (NRR) and GDP: An Augmented Autoregressive Distributed Lag (ARDL) Bound Test

“…This means we can reject H2, which claims that NRR have no effect on India's GDP. Our findings are supported by the Adabor et al (2022) study, the main finding of which revealed that a 1% increase in oil resource rent generates a 0.84% increase in Ghana's economic growth in the long run. Ampofo et al (2020) examined the impact of total natural resource rent on economic growth using the nonlinear autoregressive distributed lag (NARDL) and nonlinear Granger causality in the case of the world's top ten mineral-rich countries from 1981 to 2017.…”

“…Our findings are consistent with Mohamed's (2020) long-run Granger causality tests, which revealed a unidirectional causal relationship running from resource rents to GDP growth as well as development expenditure to GDP growth. The Toda-Yamamoto test method also revealed a unidirectional causality running from oil resource rent to Ghana's economic growth (Adabor et al 2022).…”

The role of natural resources in financial expansion: evidence from Central Asia

“…It was discovered that the INQ positively affects FE. Recent research has also supported the "resource blessing" theory for Ghana (Adabor et al 2022), and Gulf Cooperation Council Countries (Altaee et al 2022).…”

Averting the “resource curse phenomenon” through government effectiveness. Evidence from Ghana's natural gas production

“…In examining this topic, we speak directly to economic literature that examines the linkage between economic growth and natural resources (Adabor et al. , 2022; Saâdaoui and Jbir, 2021; Cheng et al.…”

“…In examining this topic, we speak directly to economic literature that examines the linkage between economic growth and natural resources (Adabor et al, 2022;Saâdaoui and Jbir, 2021;Cheng et al, 2021;Ofori and Grechyna, 2021). Within this literature, our study is closely related to studies that focused on the association between natural gas consumption and gross domestic product (Diugwu et al, 2013;Kum et al, 2012).…”