Testing the export-led growth paradigm through econometric methods: Empirical evidence from Namibia.

Abstract

Despite the large volume of documented empirical studies in the existing literature concerning the export-led model in the last four decades, the exact connection between exports and economic growth remains largely unanswered. Indeed, both theoretical and empirical inquiries are still seeking for definite answers. Accordingly, this study employs the VAR technique to empirically assess the applicability of the export-led growth model in the context of Namibia through the help of quarterly time-series data-sets for the period covering 1990 to 2012. In this regard, the study tested for the existence of a long-run relationship between exports and economic growth. The results of the unit root test indicated that, foreign direct investment and exchange rate variables attained a stationary status in levels, while real gross domestic product and exports only became stationary after first differencing. The cointegration test suggests a stable long-run relationship among the variables used in the VAR specification. The Granger-causality test found a unidirectional relationship running from exports to economic growth. Therefore, the study recommends that trade policies which encourages export expansion should be aggressively pursuit by the government of Namibia, while simultaneously striving towards improving upon the competiveness of its exports in foreign markets.