An investigation into the impact of fiscal policy on investment in Namibia from 1990 to 2017
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Date
2020
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Publisher
University of Namibia
Abstract
Evidence from the credit rating agencies that resulted in the sovereign credit downgrade
for Namibia, informed of the need to investigate fiscal policy's ability to influence
investment. Hence, this study investigated the impact of fiscal policy on investment by
considering the following variables: taxes, government spending and investment. It
employed the bounds testing (ARDL) approach to cointegration to examine the long-run
and short-run relationships between fiscal policy and investment in Namibia for the
period 1990 to 2017. The ARDL model revealed a positively significant relationship
between independent variables government expenditure, total revenue, gross domestic
product, real interest and the dependent variable: investment. Error correction term
(ECT) from the study was negative and statistically significant. The results of the ECT
revealed an average speed of 79.1 1% for vruiables to adjust from any disequilibrium
back to the long-run equilibrium annually. Furthermore, unit root tests (Augmented
Dickey Fuller (ADF) and the Phillips-Perrons (PP), were employed to investigate for
stationary I non-stationary of the series the test was applied), diagnostic tests (Normality
test, Serial correlation LM test and Heteroscedasticity test are applied) and stability tests
( the CUSUM test was used to test for existence of any instability of the coefficients and
whether or not the model exhibited some structural changes over the study period) were
used to ascertain the fitness of the model. The study recommends policy-makers to
thoroughly review monetary and fiscal policy, applying the relevant policy mix at the
most effective and efficient timeframe. Balancing the two policies is very critical to
investment and economic growth as investors and other agents of growth are heavily
dependent on prudent monetary and fiscal policy stance
Description
A thesis submitted in partial fulfilment of the requirements for the Degree of Master of Business Administration Finance
Keywords
Credit rating agencies, Fiscal policy, Namibia, Policy makers, University of Namibia, 1990-2017, Investments