An assessment of the relationship between public debt, government expenditure and revenue in Namibia

This paper investigates the relationship between government expenditure, government revenue and public debt in Namibia by employing the data of these variables for the period 1980 to 2018. An error correction model (ECM) was employed to analyse the short-run dynamics and a positive relationship between government expenditure and government revenue was found. Similarly, there is supporting evidence that an increase in public debt will stimulate government expenditure. The error correction term indicates that any disequilibrium is corrected at an annual speed of 46.4 percent. Additionally, the pair-wise Granger causality test fails to support the spend-revenue hypothesis. However, there is supporting evidence that the tax-spend hypothesis does hold for Namibia. The study recommends that policy-makers should thoroughly review government expenditure and bring it to optimal levels in order to prevent the widening of public debt

The Effect of Fiscal Policy on Capital Flight in Namibia

The occurrences of capital flight continue to be of great concern for many developing countries and Namibia is not an exception to this. This study aimed at examining the effect of fiscal policy on capital flight in Namibia for the period, 2009-2018. To assess this, the Auto-Regressive Distributive Lag (ARDL) bound test to cointegration technique was employed. The finding revealed that there is a long-run relationship between the selected macroeconomic factors and capital flight. In particular in the long-run government expenditure and its interaction with debt stock are found to positively affect capital flight. In the short-run however, past capital flight, previous period tax rates, previous external debt, current debt stock, previous inflation rate, as well as previous financial deepening were found to bear a positive effect on capital flight. Estimate of capital flight using the residual approach shows that Namibia lost about N$42 billion in 9 years through capital flight. This means on average Namibia lost close to N$ 5 billion in capital flight. These empirical findings, call for serious policy interventions in order to minimize and contain the issue of capital flight in the country

Investigating the Effects of Government Expenditure and Money Supply on Unemployment in Namibia

This paper examines how government expenditure and money supply affect unemployment in Namibia. It employs the ARDL and ECM estimation techniques to establish the underlying relationship for the period 1980-2018. The results support the hypothesis that government expenditure and money supply can be used to contain unemployment. Additionally, an evidence of both long and short-run causality from government expenditure and money supply to unemployment is found. Practical policy implications indicate that in order to effectively combat unemployment problem in Namibia, the study recommends that there is a  need for policy makers to ensure that the goal of employment creation is mainstreamed in all relevant fiscal and monetary policies responses in the country. Moreover, there is also a need to identify and propose policies that can help to do away with the lack of effective policy intervention

Structural Changes of the 21st Century and their Impact on the Gold Price

Beginning in the trough of 2000 and culminating in the peak of 2012, gold prices have exhibited a spectacular and unparalleled increase. Based on annual averages, the price of gold did not decrease at all over this 12 year period. The paper considers the various factors that have shaped the surge of gold spot prices over the last two decades using quarterly data. The analysis considers the role of structural changes such as China’s liberalization of the domestic gold market post-2003 and its impact on demand as well as other important economic factors such as risk, the role of quantitative easing and other fundamental factors in the gold market. The study investigates which of the macroeconomic and structural factors are responsible for the long term bullish trend in the gold price, of which China, global economic risk assessments along with quantitative easing have been crucial to understanding the almost uninterrupted price increase over the period

Examining the relationship between term structure of interest rates and economic activity in Namibia

This paper analysed the forecasting ability of yield-curve as a predictor of the short-run fluctuations in economic activities in Namibia. The study employed the techniques of unit root, cointegration, impulse response functions and forecast error variance decomposition on the quarterly data covering the period 1996 to 2015. The results revealed a negative relationship between the term structure of interest rates and economic activities, though statistically insignificant. This suggests that the yield-curve has no forecasting ability as a predictor of economic activity in Namibia

Revenue productivity of the tax system in Namibia: Tax buoyancy estimation approach

Buoyancy refers to how tax revenue responds to a gross domestic product without correcting for discretionary alterations in the tax system. The paper assessed the buoyancy of Namibia’s overall tax system in an attempt to measure the response of the tax system in entirety because of fluctuations in the national income and/or the deliberate act by the government to increase tax rate, reviewed tax code and tax machinery etc. The study employed the Engle-Granger approach to the error correction model to estimate the tax buoyancy for the period 2001 to 2014. The empirical findings from the study revealed that overall the Namibian tax system is income inelastic and not buoyant. This is confirmed by a low and negative value of 0.036 which is less than unit. Thus, the economy is not generating sufficient revenue both through discretionary tax measure and through the expansion in the economic activities. Therefore, the government need to introduce measures that will allow for more tax revenue collection to have a stable revenue base. This also means the government need to keep track of tax mobilization with growth in the gross domestic product as well as to ascertain taxes that are productive

Essays on FDI and welfare dynamics in Africa

Thesis (PhD)--Stellenbosch University, 2017.ENGLISH SUMMARY : Industrialisation for broad-based development and economic transformation remains Africa’s overarching priority. This dissertation examines the dynamics of how Foreign Direct Investment (FDI) translates into social welfare functions. A three, stand-alone papers structure is followed within the ambit of this dissertation. A set of welfare indicators, such as multifactor and non-monetary poverty measures, is employed to examine the welfare benefits/losses arising from FDI activities. The welfare aspect of society is a multidimensional phenomenon; however, most previous studies have employed a one-dimensional approach or income-based poverty metric which may not adequately capture the underlying dynamics. This research study addresses the inadequacy of a conventional one-dimensional approach by employing a more comprehensive framework. The first paper aims to examine the welfare impact of FDI in a panel of 20 African countries during the period 2000–2013. The multifactor and non-monetary measures of welfare, as well as the non-linearity of FDI on welfare, are examined. In addition, the Driscoll and Kraay standard errors and the Augmented Mean Group (AMG) estimator by Eberhardt and Teal (2010) that account for cross-sectional dependency, endogeneity and heterogeneity within panel units, have been used. The results suggest that the effect of FDI on welfare exhibits a non-linear pattern, with initial increases in welfare being eroded after a turning point. It has also been found that FDI is ultimately welfare enhancing exclusively via health outcomes. The second paper examines the effect of FDI on disaggregated levels of educational attainment in Africa on different levels of income groupings. An instrumental variable estimation technique within a Generalised Method of Moments (GMM) framework that controls for endogeneity has been employed. Additionally, the Driscoll–Kraay standard errors that are robust to cross-sectional and temporal dependency have been utilised. The findings indicate that FDI has a negative but transitory effect on human capital development. The quadratic term of FDI shows a positive effect, an indication that there is a turning point after which the human capital-augmenting hypothesis is supported. The last paper examines the effect of FDI on income inequality in a panel of 16 African countries for the period 1980–2013. To ensure consistent estimates, a Pooled Mean Group (PMG) estimator by Pesaran, Shin and Smith (1999) was used. Both the non-linear effect and heterogeneity were controlled by using a PMG estimator. There is robust evidence that the relationship is non-linear and a U-shaped effect of FDI on inequality is documented. The results reveal that FDI improves equal distribution of income in the countries that have been examined. However, this effect diminishes with further increases in FDI. Policy implications that emanate from this study indicate that FDI can be used as a policy instrument to address Africa’s developmental agenda. However, optimal efficacy of FDI differs across various indicators of economic welfare. Although FDI may be growth enhancing, Africa is still faced with a challenge of ensuring that the resulting FDI-induced growth leads to inclusive development. Therefore, FDI is not a panacea, but has the potential to serve as a catalyst for inclusive and sustainable economic development.AFRIKAANSE OPSOMMING : Geen opsomming beskikbaar