Determinants of Stock Market Prices in Namibia

This paper investigates the macroeconomic determinants of stock market prices in Namibia. The investigation was conducted using a VECM econometric methodology and revealed that Namibian stock market prices are chiefly determined by economic activity, interest rates, inflation,money supply and exchange rates. An increase in economic activity and the money supply increases stock market prices, while increases in inflation and interest rates decrease stock prices. The results suggest that equities are not a hedge against inflation in Namibia, and contractionary monetary policy generally depresses stock prices. Increasing economic activity promotes stock market price developmentstock market prices; arbitrage pricing theory; cointegration; impulse reponses; Namibia

Modelling Macroeconomic Determinants Of Stock Market Prices: Evidence From Namibia

This paper investigates the macroeconomic determinants of stock market prices in Namibia. The investigation was conducted using a VECM econometric methodology and revealed that Namibian stock market prices are chiefly determined by economic activity, interest rates, inflation, money supply and exchange rates. An increase in economic activity and the money supply increases stock market prices, while increases in inflation and interest rates decrease stock prices. The results suggest that equities are not a hedge against inflation in Namibia, and contractionary monetary policy generally depresses stock prices. Increasing economic activity promotes stock market price development

Interest Rate And Stock Market Returns In Namibia

This paper analyses the causal relationship between interest rate and stock market return in Namibia for the period 1996 to 2012. The analysis was done through cointegrated vector autoregression methods. The analysis reveals that there is a negative relationship between stock market returns and interest rates in Namibia. Causality test indicates that there is bi-directional causality between stock market returns and interest rate in Namibia. The results suggest that contractionary monetary policy through higher interest rate decreases stock market returns in Namibia

Explaining Interest Rate Spread In Namibia

This paper investigates the determinants of interest rate spread in Namibia for the period 1996-2010. The investigation is conducted through cointegrated vector autoregression (VAR) or multivariate cointegration methods. The investigation reveals that interest rate spread in Namibia is determined by Treasury bill rate, inflation rate, the size of the economy, financial deepening, bank rate or discount rate and exchange rate volatility. Treasury bill rate, inflation rate and bank rate are associated with an increase in interest rate spread. The size of the economy and financial deepening are associated with a decrease in interest rate spread. The results suggest that an increasing interest rate policy pursued by the government can cause interest rate spread to rise. Increase in the cost of funds to commercial banks may be passed to consumers in the form of higher interest rate spread. An increase in the cost of doing business will cause interest rate spread to rise. Interest rate spread can be reduced by increasing the size of the economy which allows for economies of scale and greater competition. Financial deepening, which allows a high level of interbank competition, can also reduce the interest rate spread

ESTIMATING THE TOURISM POTENTIAL IN NAMIBIA

This paper investigates the determinants of tourism in Namibia for the period 1996 to 2005. The results indicate that an increase in trading partners’ income, depreciation of the exchange rate, improvement in Namibia’s infrastructure, sharing a border with Namibia are associated with an increase in tourist arrivals. The results show that there is unexploited tourism potential from Angola, Austria, Botswana, Germany, South Africa and the United States of America. This suggests that it is important to exploit the tourism potential as this would help to accelerate economic growth and generate the much needed employment.

Estimating the equilibrium real exchange rate and misalignment for Namibia

The exchange rate is one of the most challenging macroeconomic policy issues in any economy. There is a general agreement that policymakers should aim at avoiding real exchange rate misalignment. To avoid real exchange rate misalignment, it is important to identify the equilibrium real exchange rate. To identify the equilibrium real exchange rate it is necessary to understand the drivers of the real exchange rate, and investigate the extent to which the real exchange rate is driven by various determinants. Despite the fact that the real exchange rate is a very important component of macroeconomic policy, empirical investigation of the real exchange rate in Namibia is very limited. It is against this background that the objective of this study is to estimate the equilibrium real exchange rate and the resulting real exchange rate misalignment for Namibia during period 1970 to 2004. It also investigates the impact of real exchange rate misalignment on economic performance and competitiveness. The equilibrium real exchange rate and resulting real exchange rate misalignments were estimated using theoretical models and the application of time series econometric techniques. The fundamental approach model and the model of real exchange rate and real prices of commodities exports were estimated using the Johansen full information maximum likelihood technique. According to the estimation based on the fundamental model the real exchange rate is determined by terms of trade, openness of the economy and ratio of investment to GDP. Equilibrium real exchange rate was estimated and the results showed that the real exchange rate was misaligned. Since Namibia is a commodity exporting country the relationship between the real exchange rate and prices of commodities was also investigated. The analysis revealed that there is a long-run co-movement between real exchange rate and prices of commodity exports. Increase in prices of commodities causes the real exchange rate to appreciate. There was some overvaluation and undervaluation. The VAR methodology was implemented to test the impact of real exchange rate misalignment on economic performance and competitiveness. The analysis revealed that real exchange rate misalignment hampers economic growth and competitiveness. It is important for policymakers to monitor the real exchange rate and ensure that it does not diverge significantly from its equilibrium value. Reduction in real exchange rate misalignment is also important to ensure that the country achieves a high level of export and remains competitive in order to have a sustainable level of growth. As a commodity exporting country, Namibia can have either a flexible nominal exchange rate regime which facilitates slow change of relative inflation rate, or price and wage flexibility to facilitate the maintenance of the nominal exchange rate peg. Alternatively, Namibia is a good candidate for pegging the currency to the prices of export commodities because its export is concentrated on few products. This option implies that Namibia leaves the CMA. However, it is important to note that Namibia is a proponent of regional integration and a move away from the CMA will not be consistent with the plans of SADC to establish a monetary union by 2016.Thesis (PhD (Economics))--University of Pretoria, 2007.EconomicsPhDunrestricte

Does exchange rate volatility deter trade in Sub-Saharan Africa?

Abstract: This study investigates the effects of exchange rate volatility on trade in 39 selected Sub-Saharan Africa (SSA) countries for the period 1995-2012. Export and import models were estimated using panel data econometric technique. Three measures of volatility are used. These are standard deviation, generalized autoregressive conditional heteroskedasticity and Hodrick-Prescott (HP)-Filter. The results suggest that the effect of exchange rate volatility on trade is dependent of the type of volatility measure used. This reflects the importance of not solely relying on a unique measure of volatility. The results revealed that exchange rate volatility (measured with standard deviation and HP filter) depresses exports, suggesting that SSA exporters are susceptible to reduce their export activities when exchange rates become volatile. However, the fact that the degree of the impact of exchange rate volatility on trade is relatively weak, suggest that should SSA’s policy makers decide to pursue a policy intended to reduce exchange rate volatility in order to boost trade, it might be of little or no value. The results also indicate that exchange rate volatility is associated with a reduction in imports

Empirical test of the Ricardian Equivalence in the Kingdom of Lesotho

Abstract: The objective of this paper is to test the existence of Ricardian Equivalence in Lesotho using annual data for two sample periods, 1980–2014 and 1988–2014. This proposition is important and has crucial implications for tax policy. Household consumption, government debt, government expenditure, GDP per capita, population growth and inflation are variables which are used for this analysis. The study used ARDL cointegration approach to investigate the relationship between these variables. The study found that there is long run equilibrium relationship among the variables in two sample periods. The results show that an increase in government debt or government expenditure will decrease household consumption per capita. This implies that the Ricardian Equivalence does hold for Lesotho. The results also imply that fiscal policy is an ineffective tool to stabilize the economy. Lesotho has limited fiscal flexibility, and it will be difficult or challenging to increase private consumption and economic growth, particularly during economic downturn

The finance-growth nexus in Namibia

This paper tests the causal relationship between financial development and economic growth in Namibia for the period 1980 to 2007. The analysis shows that there is evidence which points that financial development causes economic growth. It also shows that economic growth causes financial development. This suggests that Namibia should promote financial development or financial deepening as a strategy to enhance economic growth. At the same time, the country should also develop its real sector in order to promote economic development