An Investigation Of The Relationship Between Balance Of Payments And Economic Growth In Namibia

ABSTRACT

The study investigated the relationship between balance of payments and economic growth for Namibia using quarterly time series data over the period 1999q1to 2018q2. The variables used include real gross domestic product, balance of payments, real exports, real effective exchange rate, net foreign capital inflow and terms of trade. This study employed time series techniques such as unit root and cointegration. The Bounds co-integration analysis and Autoregressive Distributive Lag (ARDL) model were used in estimating the long run relationship between balance of payments and economic growth. Cointegration was found among the variables in the models that were estimated, that is, Thirlwall‟s extended model for developing countries and the weak version of Thirlwall‟s law. The study found a significant long run relationship between balance of payments and economic growth in Thirlwall‟s extended model suggesting that the Namibian economy is balance of payments constrained. The findings endorse that effective policies that promote exports and boost trade have a positive impact on economic growth in Namibia. Therefore, promoting expansion of the export sector and maintaining a favorable balance of payments position in various avenues can enhance economic growth in Namibia.