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An econometric analysis of savings and investment in Namibia: is savings really prior to investment? By Oscar Musilika
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An econometric analysis of savings and investment in Namibia: is savings really prior to investment? By Oscar Musilika

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Pumping resources in financial sector reform will help increase the level of savings by widening the range of available savings instruments and in¬creasing the expected return through higher real …

Pumping resources in financial sector reform will help increase the level of savings by widening the range of available savings instruments and in¬creasing the expected return through higher real interest rates and reduced risks, as deeper markets make financial assets more liquid.

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  • 1. SCHOOL OF ECONOMICS AND FINANCE SCHOOL OF MANAGEMENT POLYTECHNIC O F N A M I B I A transforming into Namibia University of Science and Technology RESEARCH TOPIC: AN ECONOMETRIC ANALYSIS OF SAVINGS AND INVESTMENT IN NAMIBIA: IS SAVINGS REALLY PRIOR TO INVESTMENT? Name of Student: OSCAR A MUSILIKA Econometric Methodology: Unit Root analysis, Johansen Cointegration analy- sis and Pairwise Granger Causality test. Findings: for the studied sample peri- od 1995-2011; savings and investment were not cointegrated, which may imply the existence of capital mobility. Further- more,aunidirectionalcausallinkbetween savings and investment was proven to exist,running from savings to investment. Based on the experimental findings the following policy recommendations were made:  Acombined fiscal and monetary policy initiatives are needed to ensure equilibrium between domestic re- sources and financing in the economy. Government budget targeting would minimize the resource gap and will bring equality between gross domestic sav- ings and capital formation in the current account.  The basic reason for the absence of long run equilibrium between savings and investment in Namibia is the decline in savings in the economy. To address this, the pattern of investment should be changed with an objective of promoting employment and reducing inflation. Pro- moting savings through various incen- tives such as income tax reduction, high- er deposit rates and deepening of the financial sector should be implemented.  The efficient use of external aid and finance to promote growth and savings is the immediate priority.  Pumping resources in financial sector reform will help increase the level of savings by widening the range of available savings instruments and in- creasing the expected return through higher real interest rates and reduced risks, as deeper mar- kets make financial assets more liquid. RESEARCH DAY

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