An Econometric Time-Series Analysis of the Dynamic Relationship between Foreign Trade and Economic Growth in a Developing Country: Evidence from Namibia
An Econometric Time-Series Analysis of the Dynamic Relationship between Foreign Trade and Economic Growth in a Developing Country: Evidence from Namibia

Summary/Abstract: Economists have an inclination for quantifying the relationships amongst variables at both micro and macro levels. In this study, the possibility of a long-run relationship between foreign trade and economic growth in Namibia is assessed. Exports, foreign direct investment and exchange rates were used as potential predictors of economic growth, while real gross domestic product served as a proxy to economic growth. Quarterly time-series macro-economic secondary data sets were utilised from the period 1990 to 2013. Firstly, the study found positive relationships amongst the four variables used in the study. Indeed, this positive relationship suggests that the economy of Namibia can potentially be expanded by means of foreign trade. The result is also in line with broad economic theory.Secondly, the study found that economic growth responds stronger to changes in exports and foreign direct investment compared to changes in exchange rates. Thirdly, co-integrating relationships were found amongst the variables used in the study, implying a long-run relationship amongst these variables. Lastly, the study found that exports indeed Granger-cause economic growth. The implications of the research are that the results of the research could be used to improve economic policy for Namibia and other developing countries.

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