Is Namibia's inflation import-driven? An econometric investigation.

Abstract

The principal objective of this study was to investigate and test the hypothesis that Namibia’s inflation is mainly driven by imports using annual macroeconomic data. The study relied heavily on the Ordinary Least Squares (OLS) estimation technique. The study confirmed the results of previous studies (which used different methodologies from the current study) that inflation in Namibia is heavily import driven. The other variables that were found significant in explaining inflation in Namibia are rate of growth of GDP, broad money supply (M2), real interest rates and the real exchange rate. The main conclusion that we came to is that Namibia needs to put more emphasis in developing its manufacturing base which would ensure increased domestically produced output and less imported inflation from South Africa and the rest of the world.