Modelling asymmetric relationship between exports and growth in a developing economy: Evidence from Namibia

Background: Namibia is an open economy where international trade accounts for a greater
proportion of gross domestic product (GDP). Openness of the Namibian economy for the
period 2010 to 2018 has been on average 111% of GDP. The high level of openness of the
economy raised an important question on the relationship between export and economic
growth in Namibia. Previous studies investigated the linear relationship between these two
variables. The investigation was also done at an aggregate level. This raises important
questions on whether the relationship between export and economic growth is asymmetric.
It also raises an important question on whether this relationship is sector specific.
Aim: In order to fill the gap in previous research, this study investigates the asymmetric or
non-linear relationship between the main export sectors and economic growth in Namibia. A
non-linear relationship between the two variables will indicate that negative and positive
values of the explanatory variables have different effects on the dependent variable. This
analysis is done for the main export sectors of the Namibian economy in order to ensure the
policy recommendations are sector specific.
Setting: Standard economic theoretical models on the relationship between export and
economic growth are used to test the non-linear relationship between the two variables. The
study covers the period 2010–2018 and focuses on the three main export sectors (diamonds,
manufactured food and live animal products) and growth of the Namibian economy.
Methods: This study uses non-linear autoregressive distributive lag in order to estimate the
asymmetric relationship between the main export sectors and economic growth of Namibia.
The estimation is done for the three main exporters of the Namibian economy.
Results: The results indicate that there is a symmetric relationship between main export
sectors and economic growth of the Namibian economy. The results show that an increase
(positive values) in export of the three main export products will cause economic growth to
improve. Negative values (decrease in export) will cause economic growth to deteriorate.
Conclusion: The results suggest that estimating the non-linear relationship for different sectors
of the economy (instead of estimating the relationship at aggregate level for total exports) will
ensure that economic policies are sector-specific. The results further suggest that when exports
are declining, expansionary policies will be the appropriate responses.

Keywords: Economic growth; export; asymmetric modelling; non-linear autoregressive
distributive lag; NARDL; Namibia; unit root; cointegration; Breitung; Kapetanios, Shin, Shell; KSS.