The Impact of the Terms of Trade on Economic Growth of Namibia

The impact of terms of trade on economic growth in any country cannot be underestimated since it affects the external balance of payments and have direct impact on the overall economy. This paper investigates the effect of terms of trade on economic growth of Namibia using annual time series data from 1989 to 2019. The study applies ARDL model bound testing approach determine the long-run association between the variables. The results show the variables are co-integrated i.e. there is long run equilibrium between the terms of trade and economic growth. Further, the results of the coefficient of ECMs model is negative and statistically significant which means that generally terms of trade have a short-run relationship with the economic growth of Namibia. Furthermore, Granger Causality indicates that terms of trade do not granger cause economic growth and vice versa. We suggest that economic policies may be applied to depreciate terms of trade which will further enhance the economic growth of Namibia.