The finance-growth nexus in Namibia

Eita, Joel Hinaunye (2009): The finance-growth nexus in Namibia. Published in: African Finance Journal No. Special Issue 1 (2009): pp. 162-178.

Abstract

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: financial development, economic growth, causality, Namibia
• Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O15 - Human Resources ; Human Development ; Income Distribution ; Migration; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance

References

Ahmed, A.D. (2006): “The Impact of Financial Liberalisation Policies: The Case of Botswana” Journal of African Development, 1(1), pp.13-38.

Apergis, N., Filippidi, I. and Economidou, C. (2007): “Financial Deepening and Economic Growth Linkages: A Panel Data Analysis” Review of World Economics, 143(1), pp. 179-198.

Aziakpono, M.J. (2004): “Financial Intermediation and Economic Growth in Economic Integration: The Case of SACU,” http://www.csae.ox.ac.uk/conferences/2004- GPRaHDiA/papers/3m-Aziakpono-CSAE2004.pdf.

Bank of Namibia. (Various Issues): Annual Report. Windhoek: Bank of Namibia.

Calderon, C. and Liu, L. (2003): “The Direction of Causality Between Financial Development and Economic Growth” Journal of Development Economics, 72, pp. 321-334.

Choe, C. and Moosa, I.A. (1999): “Financial System and Economic Growth: The Korean Experience” World Development, 27(6), pp. 1069-1082.

Chow, P.C.Y. (1987): “Causality between Export Growth and Industrial Development:Empirical Evidence from the NICs” Journal of Development Economics, 26(1), pp. 55-63.

Darat, A.F. (1996): “Trade and Development: The Asian Experience” Cato Journal, 6(2), pp. 695-699.

Engle, R.F. and Granger, C.W.J. (1987): “Co-Integration and Error Correction: Representation,Estimation and Testing” Econometrica, 55(2), pp. 251-276.

Engle, R.F. and Yoo, B.S. (1987): “Forecasting and Testing in Co-integrated Systems” Journal of Econometrics, 35, pp. 143-159.

Fry, J.M. (1978): “Money and Capital or Financial Deepening in Economic Development?” Journal of Money, Credit and Banking, 10(4), pp. 464-475.

Fry, J.M. (1980): “Saving, Investment, Growth and the Cost of Financial Repression” World Development, 8, pp. 317-327.

Galbis, V. (1977): “Financial Intermediation and Economic Growth in Less-Developed Countries: A Theoretical Approach” Journal of Development Studies, 13, pp. 58-72.

Ghali, K.H. (1999): “Financial Development and Economic Growth: The Tunisian experience” Review of Development Economics, 3(3), pp. 310-322.

Granger, C.W.J. (1969): “Investigating the Causal Relations by Econometric Models and Cross-Spectral Methods” Econometrica, 37(3), pp. 424-238.

Granger, C.W.J. (1988): “Some Recent Developments in a Concept of Causality” Journal of Econometrics, 39, pp. 199-211.

Greenwood, J. and Smith, B.D. (1997): “Financial Markets in Development and the Development of Financial Markets” Journal of Economic Dynamics and Control, 21, pp. 145- 181.

Gurley, J.G. and Shaw, E.S. (1967): “Financial Structure and Economic Development” Economic Development and Cultural Change, 15(3), pp. 257-268.

Harris, R.I.D. (1995): Using Cointegration Analysis in Econometric Modelling. London: Prentice Hall/Harvester Wheatsheaf.

Harvey, C. (1996): “Banking Policy In Botswana: Orthodox but Untypical”, IDS Discussion Paper No. 39, Institute of Development Studies, Sussex.

IMF (2007): “Namibia: Financial System Sustainability Assessment, Including Report on the Observance of Standards and Codes on Banking Supervision”, IMF Country Report No. 07/83, International Monetary Fund.

Ireland, P.N. (1994): “Money and Growth: An Alternative Approach” American Economic Review, 84(1), pp. 47-65.

Jefferis, K. (1995): “The Botswana Share Market and its Role in Financial and Economic Development” World Development, 23(4), pp. 663-678.

Johansen, S. (1988): “Statistical Analysis of Cointegrating Vectors” Journal of Economic Dynamic and Control, 12, pp. 231-254.

Johansen, S. (1995): Likelihood Based Inferences in Cointegrated Vector Autoregressive Models. Oxford: Oxford University Press.

Jung, W.S. (1986): “Financial Development and Economic Growth: International Evidence” Economic Development and Cultural Change, 34, pp. 334-346.

King, R.G. and Levine, R. (1993): “Finance and Economic Growth: Schumpeter Might be Right” Quarterly Journal of Economics, 108(3), pp. 717-737.

Levine, R. (1997): “Financial Development and Economic Growth: Views and Agenda” Journal of Economic Literature, 35(2), pp. 688-726.

Luintel, K.B. and Khan, M. (1999): “A Quantitative Reassessment of the Finance-Growth Nexus: Evidence from a Multivariate VAR” Journal of Development Economics, 60, pp. 381-405.

MacKinnon, J.G., Haug, A. A. and Michelis, L. (1999): “Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration” Journal of Applied Econometrics, 14, pp.563-577.

Marin, D. (1992): “Is the Export-Led Growth Hypothesis Valid for Industrialised Countries?” Review of Economics and Statistics, 74(4), pp. 678-688.

McCarville, M. and Nnadozie, E. (1995): “Causality Test of Export-Led Growth: The Case of Mexico” Atlantic Economic Journal, 23(2), pp. 140-145.

Mohapi, P.L and Motelle, S.I. (2007): “Finance-Growth Nexus in Lesotho: Causality Revelations from Alternative Proxies” Journal for Studies in Economics and Econometrics, 31(3), pp. 43-59.

Odhiambo, N.M. (2004): “Is Financial Development still a Spur to Economic Growth? A Causal Evidence from South Africa” Savings and Development, XXVIII(1), pp. 47-62.

Odhiambo, N.M. (2005): “Financial Development and Economic Growth in Tanzania: A Dynamic Causality Test” African Finance Journal, 7(1), pp. 1-17.

Patrick, T.H. (1966): “Financial Development and Economic Growth in Underdeveloped Countries” Economic Development and Cultural Change, 14, pp. 174-189.

Pomponio, X.Z. (1996): “A Causality Analysis of Growth and Export Performance” Atlantic Economic Journal, 24(2), pp. 168-176.

Schumpeter, J.A. (1911): The Theory of Economic Development: An Inquiry into Profits,Capital, Credit, Interest and the Business Cycle. Translated and Reprinted 1961, New York: Oxford University Press.

Sims, C. (1980): “Macroeconomics and Reality” Econometrica, 48(1), pp. 1-48.

Toda, H.Y. and Yamamoto, T. (1995): “Statistical Inference in Vector Autoregressions with Possibly Integrated processes” Journal of Econometrics, 66: 225-250.

Tsen, W.H. (2006): “Granger Causality Tests Among Openness to International Trade, Human Capital Accumulation and Economic Growth in China: 1952 – 1999” International Economic Journal, 20(3), pp. 285-302.

Zapata, H.O. and Rambaldi, A.N. (1997): “Monte Carlo Evidence on Cointegration and Causation” Oxford Bulletin of Economics and Statistics, 59(2), pp. 285-298.