Examination of the effects of macroeconomic shocks on the Namibian economy
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Date
2023
Authors
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Publisher
University of Namibia
Abstract
This Dissertation is structured on three stand-alone objectives which investigated the
effects of macroeconomic shocks on the Namibian economy between 1980 and 2018.
Firstly, the study estimated the dynamic effects of fiscal policy shocks through the
SVAR approach. IRFs results reveal that a positive spending shock immediately
increases output and interest rates while decreasing inflation. A positive tax revenue
shock increases inflation two years after impact while decreasing interest rates at
impact.
Secondly, the effects of external shocks were examined through the VAR technique.
IRFs show that global output shock positively affects domestic output growth and
interest rate, whereas the impact on inflation is negative immediately. A positive US
monetary policy shock raises domestic interest rates and inflation while
simultaneously exerting a negative influence on domestic economic growth. A positive
oil price shock in the first period yields a decline in domestic GDP growth while raising
the interest rate, albeit marginally. The impact on inflation is muted in the first year
though it is negative beyond the second period. FEVDs reflect that domestic real GDP
growth is significantly influenced by global output shocks whereas variations on both
interest rate and inflation are explained largely by US monetary policy shock.
Thirdly, it investigated the impacts of mineral commodity (copper and uranium) price
shocks (positive and negative changes) on Namibia’s business cycles (real GDP). To
determine cointegration and presence of asymmetric effects, a new stepwise-least squares NARDL model was adopted. Outcomes reveal a long-run cointegration among
real GDP, commodity prices, investment and exports shares of GDP. Moreover, the
study unveiled that both copper and uranium prices have asymmetric impacts on
Namibia’s business cycle. Positive changes for both commodity prices have the
greatest impact on real GDP than negative variations.
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The study recommends the following: first, to spur sustainable economic growth,
thereby significantly contributing towards the achievement of the country’s socio economic development, expansionary fiscal policy especially increasing public
(productive) spending is recommended. Pursuance of counter-cyclical fiscal policy is
commended specifically during low-growth periods to smoothen the business cycle.
Second, increased integration with the global economy and
industrialisation/diversification are recommended to ensure output growth while
simultaneously cushioning the economy from external shocks and serving as a buffer
against volatile commodity prices. Third, to mitigate fluctuations from external
shocks, robust macroeconomic policy intervention is strongly recommended
Description
A dissertation submitted in fulfilment of the requirements for the degree of doctor of philosophy in economic
Keywords
External Shocks, Fiscal policy shocks, Vector Autoregressions, Structural Vector Autoregressions, Impulse Response Functions, Forecast Error Variance Decomposition, NARDL, Business Cycles, Commodity Prices