Dynamic interaction between macroeconomic indicators and asset markets in Namibia
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Date
2021
Authors
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Publisher
University of Namibia
Abstract
The researcher examined the dynamic interaction between macroeconomic indicators and the asset markets in Namibia between 1995 and 2018. The study aimed at addressing four specific objectives. Firstly, the study gives an overview of the macroeconomic indicators in Namibia, the asset market’s evolution and the Namibian financial market. Secondly, the study analyses the relationship between the stock market and the macroeconomic indicators in Namibia. The stock market was tested for volatility using the ARCH/GARCH tests. The ARDL model together with the ECM model was used to assess the nature of the relationship between the stock market and the macroeconomic indicators in Namibia. The results showed that the Namibian stock market was not volatile. The results also confirmed a short and long-run relationship between the Namibian stock market and the macroeconomic indicators, seen especially through real exchange rates. Furthermore, a unidirectional causal relationship between the stock market and the
macroeconomic indicators was revealed. Thirdly, the study investigated the relationship between the foreign exchange market and the macroeconomic indicators in Namibia. The ARCH/GARCH, the TGARCH and the EGARCH tests confirmed volatility in the foreign exchange market. The ECM test indicated that the volatility in the Namibian foreign exchange market can be explained by the macroeconomic indicators in Namibia. Additionally, the ECM test indicated that there was indeed a relationship between the foreign exchange market and the macroeconomic indicators in Namibia. The fourth objective tested the relationship between the housing market and the macroeconomic indicators in Namibia. The SVAR test confirmed the relationship between the housing market and macroeconomic indicators in Namibia. The results indicated that the housing market responded to shocks in the macroeconomic indicators in Namibia. Similarly, although the housing market explained most of its innovations, the macroeconomic indicators contributed to fluctuations in the housing market as well. The Granger Causality Test indicated that there was a unidirectional causal relationship between the housing market and the macroeconomic indicators in Namibia. Monetary policy expansion was recommended to promote macroeconomic objectives through the Namibian stock market and the Namibian foreign exchange. Fiscal policy will be appropriate in dealing with the volatilities in the foreign exchange market. Monetary policy contraction was recommended to promote the housing market through credit availability.
Description
A research dissertations submitted in partial fulfillment of the requirements for the Degree of Doctor of Philosophy in Economics
Keywords
Macroeconomic indicators, Stock market, Foreign exchange market, Vector Autoregression