Modelling asymmetric relationship between exports and growth in a developing economy: Evidence from Namibia

Background: Namibia is an open economy where international trade accounts for a greater proportion of gross domestic product (GDP). Openness of the Namibian economy for the period 2010 to 2018 has been on average 111% of GDP. The high level of openness of the economy raised an important question on...

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Main Authors: Teboho Jeremiah Mosikari, Joel Hinaunye Eita
Format: Article
Language:English
Published: AOSIS 2020-03-01
Series:South African Journal of Economic and Management Sciences
Subjects:
Online Access:https://sajems.org/index.php/sajems/article/view/2905
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author Teboho Jeremiah Mosikari
Joel Hinaunye Eita
author_facet Teboho Jeremiah Mosikari
Joel Hinaunye Eita
author_sort Teboho Jeremiah Mosikari
collection DOAJ
description Background: Namibia is an open economy where international trade accounts for a greater proportion of gross domestic product (GDP). Openness of the Namibian economy for the period 2010 to 2018 has been on average 111% of GDP. The high level of openness of the economy raised an important question on the relationship between export and economic growth in Namibia. Previous studies investigated the linear relationship between these two variables. The investigation was also done at an aggregate level. This raises important questions on whether the relationship between export and economic growth is asymmetric. It also raises an important question on whether this relationship is sector specific. Aim: In order to fill the gap in previous research, this study investigates the asymmetric or non-linear relationship between the main export sectors and economic growth in Namibia. A non-linear relationship between the two variables will indicate that negative and positive values of the explanatory variables have different effects on the dependent variable. This analysis is done for the main export sectors of the Namibian economy in order to ensure the policy recommendations are sector specific. Setting: Standard economic theoretical models on the relationship between export and economic growth are used to test the non-linear relationship between the two variables. The study covers the period 2010–2018 and focuses on the three main export sectors (diamonds, manufactured food and live animal products) and growth of the Namibian economy. Methods: This study uses non-linear autoregressive distributive lag in order to estimate the asymmetric relationship between the main export sectors and economic growth of Namibia. The estimation is done for the three main exporters of the Namibian economy. Results: The results indicate that there is a symmetric relationship between main export sectors and economic growth of the Namibian economy. The results show that an increase (positive values) in export of the three main export products will cause economic growth to improve. Negative values (decrease in export) will cause economic growth to deteriorate. Conclusion: The results suggest that estimating the non-linear relationship for different sectors of the economy (instead of estimating the relationship at aggregate level for total exports) will ensure that economic policies are sector-specific. The results further suggest that when exports are declining, expansionary policies will be the appropriate responses.
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spelling doaj.art-207a6f522fd844568fba3a2b5f2d02152022-12-21T23:54:27ZengAOSISSouth African Journal of Economic and Management Sciences1015-88122222-34362020-03-01231e1e1010.4102/sajems.v23i1.2905938Modelling asymmetric relationship between exports and growth in a developing economy: Evidence from NamibiaTeboho Jeremiah Mosikari0Joel Hinaunye Eita1School of Economic Science, Department of Economics, North-West University, MahikengSchool of Economics, College of Business and Economics University of Johannesburg, JohannesburgBackground: Namibia is an open economy where international trade accounts for a greater proportion of gross domestic product (GDP). Openness of the Namibian economy for the period 2010 to 2018 has been on average 111% of GDP. The high level of openness of the economy raised an important question on the relationship between export and economic growth in Namibia. Previous studies investigated the linear relationship between these two variables. The investigation was also done at an aggregate level. This raises important questions on whether the relationship between export and economic growth is asymmetric. It also raises an important question on whether this relationship is sector specific. Aim: In order to fill the gap in previous research, this study investigates the asymmetric or non-linear relationship between the main export sectors and economic growth in Namibia. A non-linear relationship between the two variables will indicate that negative and positive values of the explanatory variables have different effects on the dependent variable. This analysis is done for the main export sectors of the Namibian economy in order to ensure the policy recommendations are sector specific. Setting: Standard economic theoretical models on the relationship between export and economic growth are used to test the non-linear relationship between the two variables. The study covers the period 2010–2018 and focuses on the three main export sectors (diamonds, manufactured food and live animal products) and growth of the Namibian economy. Methods: This study uses non-linear autoregressive distributive lag in order to estimate the asymmetric relationship between the main export sectors and economic growth of Namibia. The estimation is done for the three main exporters of the Namibian economy. Results: The results indicate that there is a symmetric relationship between main export sectors and economic growth of the Namibian economy. The results show that an increase (positive values) in export of the three main export products will cause economic growth to improve. Negative values (decrease in export) will cause economic growth to deteriorate. Conclusion: The results suggest that estimating the non-linear relationship for different sectors of the economy (instead of estimating the relationship at aggregate level for total exports) will ensure that economic policies are sector-specific. The results further suggest that when exports are declining, expansionary policies will be the appropriate responses.https://sajems.org/index.php/sajems/article/view/2905conomic growthexportasymmetric modellingnon-linear autoregressive distributive lagnardlnamibiaunit rootcointegrationbreitungkapetanios, shin, shellkss
spellingShingle Teboho Jeremiah Mosikari
Joel Hinaunye Eita
Modelling asymmetric relationship between exports and growth in a developing economy: Evidence from Namibia
South African Journal of Economic and Management Sciences
conomic growth
export
asymmetric modelling
non-linear autoregressive distributive lag
nardl
namibia
unit root
cointegration
breitung
kapetanios, shin, shell
kss
title Modelling asymmetric relationship between exports and growth in a developing economy: Evidence from Namibia
title_full Modelling asymmetric relationship between exports and growth in a developing economy: Evidence from Namibia
title_fullStr Modelling asymmetric relationship between exports and growth in a developing economy: Evidence from Namibia
title_full_unstemmed Modelling asymmetric relationship between exports and growth in a developing economy: Evidence from Namibia
title_short Modelling asymmetric relationship between exports and growth in a developing economy: Evidence from Namibia
title_sort modelling asymmetric relationship between exports and growth in a developing economy evidence from namibia
topic conomic growth
export
asymmetric modelling
non-linear autoregressive distributive lag
nardl
namibia
unit root
cointegration
breitung
kapetanios, shin, shell
kss
url https://sajems.org/index.php/sajems/article/view/2905
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