Browsing by Author "Tutu, Dennis Ebo"

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    International gasoline price pass-through effects and the impact of domestic ex-pump prices on stock returns
    (KNUST, 2016-06) Tutu, Dennis Ebo
    ABSTRACT Domestic fuel pricing is a touchy subject for governments all over the world. Many advanced countries have adopted a full deregulation of their petroleum sectors to ensure that fuel prices are determined by the market. Governments of many developing and emerging economies however intervene to influence the timing and degree of changes in international fuel prices to domestic prices. These interventions not only account for the huge disparity in prices of petroleum product across the world but also result in the distortion of domestic fuel price from international prices, making it more difficult to predict. The first part of this study seeks to examine pass-through effects of international gasoline prices to domestic ex-pump prices to determine the timing and magnitude of changes in domestic prices as a result of changes in international prices in Ghana. Many researchers use crude oil price as a proxy for energy cost in their studies on Ghana and other developing countries, however, the distortions in domestic price as a result of government intervention makes the use of crude oil misleading when studying energy cost on domestic businesses. The second part of this study thus explores the impact of energy costs on stock returns in Ghana using domestic ex-pump gasoline price as a proxy. Empirical methods like Johansen cointegration model, Vector Autoregressive model (VAR), Vector Error Correction Model (VECM), Granger causality tests as well as Toda-Yamamoto procedure were adopted in the study. The results suggest both long and short run relationships between international and domestic ex-pump gasoline prices with changes on international gasoline market having an impact on domestic prices after three weeks although with minimal pass-through. The result from the second part of the study establishes causality from ex-pump gasoline prices to the Ghana stock exchange iii albeit weakly and also shows that gasoline prices impact the stock exchange after ten weeks.