FINANCIAL DEVELOPMENT
AND ECONOMIC GROWTH:
EMPIRICAL EVIDENCE FROM
NAMIBIA (1990 Q1-2011Q4)
Presentation Plan
1. INTRODUCTION
2. METHODOLOGY
3. RESULTS
4. CONCLUSION
1. INTRODUCTION
 Main objective:
 causal relationship between financial
development and economic growth
 Motivation
 V...
1. INTRODUCTION…
 Namibia financial services sector
 Namibia is middle income country not
industrialising fast enough
 ...
1. INTRODUCTION…
-4
-2
0
2
4
6
8
10
12
14
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
...
1. INTRODUCTION…
 Rationale and Objectives of the Study
 The contribution of the banks to national and global
economic g...
1. INTRODUCTION…
 Study objectives:
 To econometrically determine the causal links
between financial development and eco...
2. METHODOLOGY
Φ and Ѱ both denote interest rates labour force and dummy for the
implementation of the first national dev...
3. RESULTS
Table 4: Vector Autoregression Estimates: (p-values)
Equation 1 Equation 2
Adj R-squared 0.60603 0.63188
F-Stat...
3. RESULTS
3. VAR Granger Causality/Block Exogeneity Wald Tests
Dependent variable: D(LNEG)
Excluded Chi-square df Probability
D(LNFD...
3. RESULTS/ IMPULSE RESPONSE
FUNCTION
3. RESULTS/VARIANCE
DECOMPOSITION
0
20
40
60
80
100
0
20
40
60
80
100
1 2 3 4 5 6 7 8 9 10
Percent D(LNEG) variance due to...
4. CONCLUSION
 EG is explained by labour force all the other variables
included in Equation 1are insignificant
 FD is ex...
4. CONCLUSION
Recommendation
 one way of reforming the financial sector in
Namibia is to subject it to some competition
t...
I THANK YOU
Upcoming SlideShare
Loading in …5
×

Financial development and economic growth: empirical evidence from Namibia (1990 Q1-2011Q4) by Tafirenyika Sunde

1,541 views

Published on

Namibia is middle income country not industrialising fast enough. Tafirenyika Sunde looks at the causal relationship between financial development and economic growth in Namibia

0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
1,541
On SlideShare
0
From Embeds
0
Number of Embeds
6
Actions
Shares
0
Downloads
19
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Financial development and economic growth: empirical evidence from Namibia (1990 Q1-2011Q4) by Tafirenyika Sunde

  1. 1. FINANCIAL DEVELOPMENT AND ECONOMIC GROWTH: EMPIRICAL EVIDENCE FROM NAMIBIA (1990 Q1-2011Q4)
  2. 2. Presentation Plan 1. INTRODUCTION 2. METHODOLOGY 3. RESULTS 4. CONCLUSION
  3. 3. 1. INTRODUCTION  Main objective:  causal relationship between financial development and economic growth  Motivation  Very few published research  Contribution to macroeconomic literature  The need for the country to formulate polices from an informed position
  4. 4. 1. INTRODUCTION…  Namibia financial services sector  Namibia is middle income country not industrialising fast enough  Size of the sector is explained by:  Size of the population (the market)  Number of companies doing business in Namibia  Protected commercial banks (four since independence) whose roles are:  Commercial banking services  Some of the merchant/investment banking services  Mortgage services
  5. 5. 1. INTRODUCTION… -4 -2 0 2 4 6 8 10 12 14 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 GDPGROWTHRATE(%) TIME IN YEARS The Economic Growth rate of Namibia 1980-1989 growth rate was 3.3% 1990 -2011 growth rate was 4.4%
  6. 6. 1. INTRODUCTION…  Rationale and Objectives of the Study  The contribution of the banks to national and global economic growth cannot be overemphasised.  the financial services sector’s impact on resource allocation cannot be overemphasised.  pioneering work on the financial development- economic growth relationship is attributed to Schumpeter (1912).  Schumpeter (1912) contends that well functioning financial intermediaries drive technological improvement by choosing and funding entrepreneurs with the greatest probability to successfully implement innovative products and production processes.
  7. 7. 1. INTRODUCTION…  Study objectives:  To econometrically determine the causal links between financial development and economic growth in Namibia.  To establish how financial development and economic growth influence each other by applying impulse response functions and variance decomposition techniques.  To highlight policy options the policy makers need to consider.
  8. 8. 2. METHODOLOGY Φ and Ѱ both denote interest rates labour force and dummy for the implementation of the first national development plan. Used the VAR methodology based on OLS VAR Granger Causality/Block Exogeneity Wald Tests
  9. 9. 3. RESULTS Table 4: Vector Autoregression Estimates: (p-values) Equation 1 Equation 2 Adj R-squared 0.60603 0.63188 F-Statistic (Prob) 7152.021(0.0000) 6647.86(0.000) DW Statistic 2.155249 1.993733 Jarque-bera (p-value) 615945(0.000) 309.6723(0.0000) B-G LM (probχ2 ) 3.55700(0.1689) 0.440576(0.8023 B-G-P test (probχ2 ) 8.357965(0.9086) 19.02971(0.2124) ARCH test (probχ2 ) 0.089956(0.7642) 3.181991(0.2037) NB: In the results above we show the coefficient of each variable and its calculated t-statistic in brackets ().
  10. 10. 3. RESULTS
  11. 11. 3. VAR Granger Causality/Block Exogeneity Wald Tests Dependent variable: D(LNEG) Excluded Chi-square df Probability D(LNFD,2) 0.156072 5 0.9995 All 0.156072 5 0.9995 Dependent variable: D(LNFD,2) Excluded Chi-square df Probability D(LNEG) 13.71179 5 0.0175 All 13.71179 5 0.0175
  12. 12. 3. RESULTS/ IMPULSE RESPONSE FUNCTION
  13. 13. 3. RESULTS/VARIANCE DECOMPOSITION 0 20 40 60 80 100 0 20 40 60 80 100 1 2 3 4 5 6 7 8 9 10 Percent D(LNEG) variance due to D(LNEG) 0 20 40 60 80 100 0 20 40 60 80 100 1 2 3 4 5 6 7 8 9 10 Percent D(LNEG) variance due to D(LNFD,2) 0 20 40 60 80 100 0 20 40 60 80 100 1 2 3 4 5 6 7 8 9 10 Percent D(LNFD,2) variance due to D(LNEG) 0 20 40 60 80 100 0 20 40 60 80 100 1 2 3 4 5 6 7 8 9 10 Percent D(LNFD,2) variance due to D(LNFD,2) Variance Decomposition
  14. 14. 4. CONCLUSION  EG is explained by labour force all the other variables included in Equation 1are insignificant  FD is explained by economic growth and all the other variables in Equation 2 are insignificant Possible Explanation of the Results  Level of development of the financial sector  Number of banks  Branch networks of banks  Lack of financial depth and lack of competition  If banks are protected from competition, they become complacent and inefficient  Their service fees also go up (an issue that the BoN is currently grappling with now)  Interest rates also go up
  15. 15. 4. CONCLUSION Recommendation  one way of reforming the financial sector in Namibia is to subject it to some competition through the licensing of new local and foreign banks taking into account the size of the Namibian banking market  This will help increase the volume of lending even small businesses with no collateral security and possibly reduce the lending rates and service fees as banks compete for customers.  The banking sector in Namibia still needs to be developed and made more efficient so that it can lead to higher future economic growth rates.
  16. 16. I THANK YOU

×