An investigation on the relationship between commodity prices and economic growth in Namibia
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Date
2022
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Publisher
University of Namibia
Abstract
The study investigated the relationship between commodity prices and economic growth in Namibia. The main objective of the study was to investigate the relationship between commodity prices and economic growth in Namibia, specifically focusing on the spot price of uranium and zinc as well as the price per carat of diamond exported. Quarterly time series data was used for the period of 1994Q1 to 2018Q4 and data were collected from the Bank of Namibia, Namibia Statistics Agency, World Bank, Cameco Website and The Global Economy. The Autoregressive Distributed Lag (ARDL) method was used to capture the long run relationships between growth and the commodity prices. The equation was modelled under the ARDL technique, where GDP is the dependent and the prices of the commodities are the independent variables. In order to determine the long run relationship of variables, the study employed ARDL Bound test. The empirical results show that there exists an insignificant long run negative association between GDP and the spot price of uranium as well as between GDP and the spot price for zinc. However, the empirical results show that the long run relationship between GDP and the unit export price for diamonds is positive. Based on the Granger Causality test, the study concluded that there are no causal effects between growth and the spot price of diamond, and between growth and unit export price for diamond debt. Conversely, there is unidirectional causality between the price of zinc and GDP growth rate. Causality runs from price of zinc to growth. Based on the findings, the study recommends that Namibia should invest in value addition on the commodities. Value addition has become a globally accepted remedy for economic growth as it will lead to employment creation, higher commodity prices and an improved balance of trade.
Description
A research thesis submitted in partial fulfilment of the requirements for the Degree of Master of Science (Economics)
Keywords
Commodity, Economic growth, GDP growth rate