An analysis of the impact of the exchange rate on export perfomance in Namibia
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Date
2019
Authors
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Journal ISSN
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Publisher
University of Namibia
Abstract
The purpose of the study was to analyse the effect of the exchange rate on export
performance in Namibia. Furthermore, the researcher was to investigate if there is a
relationship between the exchange rate and export performance. The objectives of the
study were to examine whether there is a long run relationship between real effective
exchange rate and export performance in Namibia, to determine the casual relationship
between real exchange rate and export performance in Namibia as well as to suggest
policies for the mitigation of the impact on the domestic economy. The theories on which
this paper was based are Marshal-Lerner Condition, Exchange Rate Pass-Through and
The Balance of Payments theory. To investigate the existence of a long run relationship
between exchange rate and export performance in Namibia, the Engle-Granger two-step
estimation technique was employed. The technique entails the determination of the long term co-integration relationship through testing for stationarity of the residuals using
Augmented Dickey Fuller (ADF) test. The study revealed that the variable exchange rate
negatively affects export performance and that the coefficient is statistically significant.
From the regression estimation it can be concluded that the theoretical proposition of the
relationship between exchange rate and export performance is confirmed in the case of
Namibia. A currency depreciation results in more exports while a currency appreciation
results in a reduction in exports. Therefore, policy recommendations of the study included
employing strong financial tools to hedge against change in the international market, such
as: Accept the risk and transfer it through pricing, A void or minimise costly commodities,
seek natural hedges and manage the risk through contracts
Description
A research thesis submitted in partial fulfilment of the requirements for the degree of Master’s in Business Administration (Finance)
Keywords
Performance in Namibia, Namibia, Exchange rate, Mitigation, University of Namibia