Thesis ResearchTopic:

An econometric analysis on the impact of trade on economic growth:

Evidence from Namibia.

Introduction

Namibia has a free market and export-oriented economy and is currently one of the
besteconomies in the SADC and Southern Region. There has been a considerable interest among

policymakers and researchers in Namibia in understanding the impact of trade on Namibia’s

economic growth. However, literature, in particular, of the empirical econometric analysis

oneconomic growth varies in terms of data sets, econometric techniques, and often
producesconflicting results. The country's scientific and technological development is argued to
beattractive to foreign direct investment, (Ogbokor, 2001).The effect of trade and extent of the
market on growth is a recurring issue in the world ofeconomics. According to Cyril A. Ogbokor
(2005) in his study of the impact of trade on the Namibian economy argues that over the years,
lots of writings have been produced assessing therelationship between trade, economic growth
and development. His empirical work found thataccess to larger markets has fostered economic
growth.Hanif & Gokal (2004) demonstrated that just like many countries, whether industrialized
ordeveloping, one of the most fundamental objectives of macroeconomic policies in Namibia is
tosustain high economic growth. Not surprisingly, there has been considerable debate on
theexistence and nature of trade and growth relationship. In this study the attention has
beendeveloped to investigate the impact of trade on economic growth in Namibia using the
regressionmethod.Higher government expenditure finance with huge borrowing may or may not
contribute positively to the overall performance of the economy. Government spending inhibits
innovation.The private sector constantly series for new ideas, opinions and opportunities because
ofexcessive completion. For instance, if government increases borrowing in order to finance
itshuge expenditure, it will crowds-out the private sector, thus reducing private investment or
itmay spend substantive amount on servicing its existing liabilities that can otherwise be used for

investment. When the government borrows from another country, interest rate in that
countrygoes up because an increase in demand for loans, hence pushing up the
prices.Furthermore, in a bid to score cheap popularity and ensure that they continue to remain in
power, politicians and governments officials sometimes increase expenditure and investment
inunproductive projects or in goods that the private sector can produce more efficiently.
Thus,government activity sometimes produces misallocation of resources and impedes the
growth ofnational output (Bank of Namibia, 2009). In such cases, unfortunately, rising public
debt for evermounting public expenditure will not translated into meaningful growth and
development. This paper investigates the effect of public debt and public expenditure separately
on economicgrowth (GSDP) in the state of Namibia. Namibian economy has experienced a
tremendous increase in economic growth sinceindependence due to several factors. Namibia is
rich in primary sectors such as fishing, marineand mining. Commercial fishing sector is the fast
growing industry in Namibia. The resourceswere over exploited during the colonial period which
caused fish stock to fall to a dangerouslylow level even though it is still doing fine on the
economy (Smith, 2010).According to Bank of Namibia (2009), in 2003 the Namibian economy
grew by 3.7%, which isthe highest growth rate since 1997. Agricultural sector excluding fishing
contributed about 6% ofgrowth for the past five years from 2003 to 2008 which contributed to
the growth trend. Morethan a half of the Namibian population depends on agricultural sector.
They practice subsistence

farming. Animals including live animals and animal’s products constitute about 5% of the export

plus crop exports. The government hardly encourages local sourcing of agriculture product
andretailers of fruit, vegetables and other crop products must purchase at least 27.5% of their
stockfrom local farmers. Fish processing sector and construction industry contribute to
theimprovement of the economic growth.The mining sector continues to struggle due to the
recession over the past years even though thesector has contributed approximately 12.4% in 2007
of the GDP. Diamond mining alone made acontribution of about 5.8%; the diamond production
of about 2 million carats generates the bulkof its export earnings. Other important minerals
include Uranium, Zinc, and Copper, Gold, Leadand salt. Stones such granite and marble are also
mined but on a smaller scale. The Namibianextractive industries have experienced a significant
downturn due to development in the global

economy. Uranium is one of the extractive industries that anticipates continue continued
growthin 2008. With Namibia continuing to be a member of the Common Monetary Area
(CMA), thevalue of the Namibian dollar is the same as the value of rand, (Bank of Namibia,
2009).

South Africa is the source of about 80 to 90% of the Namibia’s import by value, including

virtually all commodities. Food, beverages, machinery and transport equipment are the
biggestimport categories. The bilateral between the two countries accounts for two thirds of the

Namibian’s total foreign trade. South Africa’s imports from Namibia are estimated to be at
about
41%, this include live animals, meat, fish and mineral products, (Bank of Namibia, 2009).While
there have been numerous theories and empirical studies the effects of trade on economicgrowth
and its effect on general performance of the country, very few have addressed theimportant issue
of actual measurements that clearly indicates sustainability. My objective here isto examine
whether trade is robust determinant of cross-country economic growth.This study uses
econometrics to analyse the impact of trade on economic growth in Namibiafocusing on today
and tomorrow. This is because econometrics is the unification of economics,mathematics, and
statistics. This unification produces more than the sum of its parts.Econometrics adds empirical
content to economic theory allowing theories to be tested and usedfor forecasting and policy
evaluation.

Aims of the study

Although Namibia has improved in its exports since independence in 1990, still
experienceunfavorable BOP (Balance of Payment) and increasing national debts. The purpose of
this studyis to investigate the level of impact trade cause on the general economic growth of a
nation like Namibia. The purpose of this study was to provide statistical and analytical evidence
of theimpact of trade on economic growth in Namibia since independence through regression
methods.Econometrics analysis gives this clear answer. Statistics cannot alone give a clear
answer. Aneconomist James Heckman provides a good answer for what distinguishes
econometrics fromstatistics. He said that econometrics focuses on establishing causation, while
statistics is contentwith correlation. So to answer the problem econometrics analysis is the best
way

Objective of the Study

The objective of this study was to evaluate the general impact of the Trade on the
Namibianeconomy, to examine whether trade is robust determinants of cross-country economic
growth,and also the extent of the linkages between exports, imports, trade agreements , interest
rates,exchange rates and industrial performance, (namibian, 2013) taking the Namibian industry
as acase study.

The summary of the main objectives of this study are:

To examine the impact of trade on Namibian economy.

To examine the workings of trade on the economic growth of Namibia.

To assess trade policies and its impact on Namibian trade

To investigate the problems affecting trade and make suggestion on how they could beresolved.

To recommend to the relevant authorities on the best policies regarding trade whichenable

Research Questions

 Is the effect of trade and extent of the market on growth a recurring issue in the world
ofeconomics?
 What has been the impact trade on the general economic growth of a nation like
Namibia?
 Is there any relationship between trade and economic growth as evidenced by the
Namibian situation?

Methodology of the Research

The study used time-series data covering 1990 to 2009. In order to isolate and analyse selected
predictors, which have contributed to the fluctuation in the economic performance of
Namibia,multiple regression models were relied upon. The software programme used in
obtaining theregression estimates is known as STATA an Econometrics Software. This is a
powerfulstatistical program with a broad set of pre-programmed econometric and statistical
tools. It is

quite popular among economists, and is continuously being updated with new methods. It is
anexcellent package for most econometric analysis, but is limited when you want to use new
orless-common econometric methods which have not yet been programed.The natural log
transformation for each of the models were also specified and fitted. The use ofthe natural log
transformation models allows the researcher to determine the responsiveness ofeconomic growth
to changes in the predictors used in the study. Secondary macroeconomic datautilised are highly
aggregative in view of the core objective of the study.

Data sources

Data relied upon in this research study were obtained mainly from the various reports of
theCentral Bank of Namibia as well as the various statistical publications of the National
Planning

Commission of Namibia, National Account, Bank of Namibia, National Statistics

Office’sstatistical reports, Ministry of Finance’s annual report, Namibia Chamber of Commerce
and

Industry [NCCI], Ministry

of Trade and Industry’s Annual reports and quarterly reviews and

World Trade Organization reports. Other sources utilized are news articles, textbooks,
journalsfrom the internet and libraries and statistical sources of data, the different theoretical
andempirical reviews on inflation in different African countries as basis of comparison and areas
ofstudies at Polytechnic of Namibia were used to facilitate the successful finalization of this
study

Data collection methods

 The data collection procedures will be as follows:

 Reports and statements shall be gathered and analysed

 Questionnaires shall be issued to management and other staff

 Interviews shall be carried out within institutions elaborated in population targets below.

Analytical and data analysis

Analytical and data analysis methods will then be used to interpret the data.
Target Population

A research population is the total number of individuals with common characteristics and are of
particular interest to the researcher (Cresswell, 2003). The research population in this
studyconsists of 40 respondents from National Planning Commission (NPC), Namibia Chamber
ofCommerce and Industry (NCCI), Ministry of Finance, Ministry of Trade and Industry
andMinistry of Small & Medium Enterprises. above at least two questionnaires will be
distributed per each organisation making a total of eighteen. The target population is nine
organisations inthis research study

Study Sample

A sample is a subset of the population described in the research population section above.
Asmentioned in Saunders

et al

. (2000), sampling provides a valid alternative to a census when:Sometimes it would be

impractical to survey the entire population due to; budget and timeconstraints. The research
sample from the chosen population shall be comprised of 10 NPCexecutives, 10 NCCI
executives, 5 Ministry of Finance executives, 5 Ministry of Small &Medium Enterprises and 10
Ministry of Trade Executives.

Research design

The research is primarily based on qualitative methods in researcher will use questionnaires
andstructured interviews to gather data from the respondents. According to Cresswell (2003:
185)the objective of qualitative research is to purposefully select participants or sites that will
besthelp the researcher to understand the problem of the research question. In order to
ensureaccurate capturing of research information, a questionnaire and interviewswas used to
collect data. The questionnaire were distributed to the respondents and collected andanalysed to
come up with results and recommendations.

References

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