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

The importance of institutional quality as a means of influencing economic growth is being given much attention. This paper examines the extent to which institutional quality under the price deregulation policy in Ghana impacts GDP growth. The study employs the Bayesian linear regression and the auto regressive distributed lag (ARDL) models in estimating a quarterly data that spans from the first quarter of 2005 to the fourth quarter of 2022. We observe that an increase in petroleum prices increases GDP growth by 0.3 units in the long run while an increase in inflation reduces GDP growth by 0.6 units in the short run. Again, we observe that in the short run an increase in foreign direct investment increases GDP growth by 3.24 units. The interactions of petroleum prices and institutional quality on the other hand reduces GDP growth in the short run by 0.91 but tend to increase GDP growth by 1.45 which is comparatively more than the decrease in the short run suggesting that institutional quality under the price deregulation policy impacts positively on GDP growth in the long run. This paper has policy implications in that it offers policy makers, especially governments, the necessity to appreciate the importance of institutional quality in the quest for implementing policies for desired growth.