Abstract:
A large volume of empirical studies have conceded that international trade can
propel development in various ways. This study evaluates the impact of trade on
economic growth in the context of Namibia for the period 1990:Q1 to 2016:Q4.
The study employed modern time series analysis technique (vector autoregression
method) as against the direct application of the method of ordinary least squares
regression. The annual data collated by the study were first transformed into
quarterly data before estimating the model. The study was driven by four specific
objectives. The empirical results arising from the study found that exports, real
exchange rate and net foreign direct investment were positively related to
economic growth as suggested by the estimated long-run equation. Moreover, the
results obtained from the forecast error variance decomposition suggest that
fluctuations in economic growth as a result of shocks were mainly explained by
economic growth itself. This is not unusual. Moreover, amongst the three
explanatory variables used in the model, real exchange rate and net foreign direct
investment contributed more towards explaining changes pertaining to economic
growth during the forecast horizon compared to exports. The findings of the study
support a number of empirical studies that were reviewed. The study, inter alia,
recommends the need for Namibia to put in place appropriate exports’ incentives
that can potentially assist in boosting the country’s exports in regional and foreign
markets. Besides, the study recommends the need for Namibia to invest
enormously in transport and communications’ infrastructures, including
renewable and non-renewable energy supplies. The study concludes by providing
directions on further research opportunities pertaining to the issue under
consideration.
