Journal of Emerging Trends in Economics and Management Sciences: Home

Abstract:
The main objective of the study was to determine the nature of the nexus between financial sector development and economic growth with specific reference to the Namibian economy. The reason why I carried out this study is that no similar study has yet been carried out in Namibia and the nature of the relationship between financial development and economic growth is still not known. This study, therefore, is the first step in attempting to provide literature that could be useful to policy makers and academics in Namibia. We used the Granger causality tests to establish the relationship among the financial sector indicators and economic growth indicators after having carried out the unit root and co integration tests. The results show that the Granger causality between financial development and economic growth is by and large bidirectional. In other words, this means that when the economy grows the financial sector may respond positively and vice versa. We also found that the financial sector variable, the logarithm of the ratio of private sector credit to gross domestic product (GDP), Granger caused the real variables, logarithm of real GDP, and logarithm of real income per capita. This is in line with the conclusion above that real variables could respond favorably to financial variables. So causality in this case is running from financial variables to real sector variables. The article ended with a cautionary statement on the size of the sample used and the general availability of statistical data on the Namibian economy, which could have negatively affected the authenticity of the results.

Keywords: Namibia, financial indicators, growth indicators, granger causality

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