Investigating the impact of financial deepening on economic growth in Namibia
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Date
2022
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Publisher
University of Namibia
Abstract
The main objective of the study was to investigate the impact of financial deepening on economic growth with specific reference to the Namibian economy. The study utilized quarterly time series data from 2004 to 2019. The paper used the ratio of money supply as percentage of gross domestic product, domestic credit to private sector as percentage of gross domestic product, and bank liquid reserves to asset ratio as proxies for financial deepening, whereas gross domestic product represented economic growth. The data were tested for unit root, where stationarity outcomes indicate that the variables were integrated of order zero (I(0)) and order one (I(1)). In that light, the study conducted a cointegration test using Wald test to determine the long-run relationship between financial deepening and economic growth. The Wald test results reveal the presence of long-run relationship between the financial deepening variables and real gross domestic product. Further, the study employed autoregressive distributed lag error correction model to estimate the dynamics of the financial deepening variable to the study. Additionally, pairwise Granger causality test was applied to determine the direction of causality among financial proxies and gross domestic product. From the error correction model, the results show that the ratio of money supply as percentage of gross domestic product was significant to the model, although the impact is very minimal. Lastly, the findings did not indicate any Granger causality among financial deepening variables and economic growth in Namibia. Hence, apart from money supply, the study recommends policy makers to focus more on other indicators to boost economic growth in Namibia.
Description
A thesis submitted in partial fulfilment of the requirements for the Degree of Master of Science (Economics)
Keywords
ARDL Error Correction model, Economic Growth, Cointegration, Gross Domestic Product